Unlicensed blockchain mining companies in Australia have led to significant financial losses for hundreds of local investors, totaling over 160 million Australian dollars ($104 million), following the liquidation of three cryptocurrency mining companies: NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd.
According to an April 12 report, the Australian Securities and Investments Commission (ASIC) initiated legal action against the companies and their directors: Brett Mendham, Ryan Brown, and Mark Ten Caten.
These companies are accused of persuading local investors to establish self-managed superannuation funds (SMSFs) and then converting the funds into cryptocurrency for investment in blockchain mining packages with fixed-rate returns.
ASIC alleges that around 450 investors trusted these companies with a total of 62 million AUD ($40 million), despite the companies operating without the required Australian licence.
The financial watchdog voiced concerns over potential mismanagement of the digital assets invested in blockchain mining and successfully requested the Federal Court to appoint liquidators to manage NGS companies’ digital currency holdings. Additionally, Mendham has been prohibited from leaving Australia.
ASIC also moved to block NGS companies from providing financial services in Australia without the proper authorization.
ASIC Chair Joe Longo advised Australians against investing their SMSFs in cryptocurrency and emphasised the commission’s focus on examining crypto products for regulatory compliance to safeguard investors.
Similarly, other Australian cryptocurrency businesses such as DCA Capital, Digital Commodity Assets Pty Ltd, and Digital Commodity Assets Fund are also under scrutiny, facing liquidation and federal court cases due to investor concerns about mismanagement and potential regulatory violations.
KordaMentha, appointed as liquidators, found debts of 100 million AUD ($65 million) owed to 100 investors. The federal court froze 55 million AUD ($36 million) worth of assets belonging to DCA Capital’s director, Ashod Balanian, who was ordered to surrender his passport.
Australian regulators have been paying more attention to the country’s crypto regulatory environment in recent months. On March 21, ASIC Commissioner Alan Kirkland highlighted the need to balance financial innovation with consumer protection and market integrity.
Australia is seen as a country on the cusp of increased crypto demand. Although institutional crypto demand remains subdued locally, stablecoins and supportive policies could stimulate the market.