Australian Securities Regulator Sues ASX Over Misleading Blockchain Project Statements
By: Isha Das
Australia's Securities and Investments Commission (ASIC) has filed a lawsuit against the Australia Securities Exchange (ASX) Ltd., alleging it made false and misleading statements about its $165 million blockchain trade settlement project, according to an August 14 statement. The legal action stems from ASX's claims in February 2022 that the project was 'on track' for an April 2023 launch and that it was 'progressing,' statements which ASIC contends were deceptive as the project was not meeting its milestones and was ultimately abandoned.
Misleading Statements
ASIC asserts that the ASX's blockchain initiative, intended to replace the ancient Clearing House Electronic Subregister System (CHESS), was already encountering significant design challenges by February 2022. Despite ASX's optimistic public announcements, the project faced substantial setbacks and was eventually halted in November 2022, leading to write-down costs of over AUD250 million (approximately USD165 million).
ASIC Chair Joe Longo emphasized that the project's failure not only resulted in major financial losses for ASX and its participants but also undermined market integrity. He highlighted the importance of accurate information for market participants to make informed decisions and invest with confidence.
'Companies and market participants rely on what the ASX says about its operations to make their own decisions and investments. We expect the ASX to be a place to list and invest with confidence. When the ASX falls short, it has wide-ranging consequences across the market,' said Longo.
ASIC's investigation revealed that the company's misleading conduct followed penalties paid by ASX in March, totaling over AUD1,050,000 (USD660 million), due to lapses in compliance with market integrity rules.
ASX's Response
In a statement on August 14, ASX's CEO Helen Lofthouse acknowledged the gravity of the lawsuit and stated that the company was currently reviewing ASIC's allegations. She emphasized ASX's commitment to supporting and delivering for its customers and mentioned the significant progress made by the organization over the past two years.
'We play a critical role at the center of Australia’s financial markets and continue to focus on supporting and delivering for customers. We are committed to taking ASX forward and have made strong progress as an organization over the past two years,' Lofthouse remarked.
ASIC is seeking declarations, pecuniary penalties, an adverse publicity order, and costs against ASX as part of the legal proceedings.
