Nikolas Sargeant
The Federal Court of Australia has ruled in favor of crypto lender Block Earner, overturning a previous decision that would have required the company to hold an Australian financial services license (AFSL) for its crypto-linked 'Earner' product.
The court dismissed the Australian Securities and Investments Commission's (ASIC) attempt to impose financial penalties on the digital asset platform, marking a significant victory for the crypto company.
According to Tuesday's judgment, the court determined that Block Earner's discontinued 'Earner' product constituted a loan arrangement rather than a managed investment scheme, which would have triggered regulatory requirements.
The Earner product, available from March to November 2022, allowed customers to loan specific cryptocurrencies in exchange for fixed-rate interest payments.
Court Overturns Previous ASIC Victory
The case began when ASIC initiated legal proceedings against Block Earner, alleging violations of corporation laws through both its 'Access' and 'Earner' products.
In its initial announcement, the regulator stated it was "seeking declarations, injunctions, and pecuniary penalties from the Court."
While a February 2024 ruling by Judge Ian Jackson imposed penalties over the 'Earner' product, determining it required an AFSL license, a subsequent June 2024 decision freed Block Earner from financial penalties after finding the company had "acted honestly and not carelessly when it offered the Earner product."
ASIC had sought penalties up to $350,000, according to Tuesday's judgment.
The appeal panel consisting of Justices David O'Callaghan, Wendy Abraham, and Catherine Button unanimously dismissed ASIC's appeal from the previous year. In addition, the court ordered ASIC to cover all legal expenses from both the original trial and the appeal process.
In a recent press release, ASIC acknowledged it is "considering this decision" from the Federal Court.
Company Rules Out Product Return Despite Legal Win
Despite securing this legal victory, Block Earner has confirmed it has no intention of reintroducing its 'Earner' products to Australian customers.
In comments to local media, Block Earner co-founder James Coombes emphasized that the Earner product was voluntarily discontinued in November 2022, adding that there are no plans for its revival.
"This case highlights the importance of ensuring regulations evolve alongside technology," Coombes stated. "Without modernised guidance, Australia risks losing fintech innovation to offshore markets more supportive of responsible crypto entrepreneurship."
Fellow Block Earner co-founder Charlie Karaboga expressed relief at the outcome, noting that the ruling "brings closure to a long and difficult process."
