The Federal Court has found that blockchain mining companies NGS Group Limited, NGS Crypto Pty Ltd and NGS Digital Pty Ltd operated a financial services business without an Australian financial services (AFS) licence.
NGS Group, NGS Crypto and NGS Digital have been permanently restrained by the Court from operating a financial services business. The Court has ordered that NGS Group, NGS Crypto and an unregistered managed investment scheme operated by NGS Group be wound up and liquidators appointed.
Over 450 Australians invested approximately $59 million with NGS Group over a 6-year period, with many investing their retirement savings via self-managed superannuation funds (SMSFs) that NGS Crypto encouraged them to establish.
In reaching its decision, the Court found that the NGS companies operated and promoted an unregistered managed investment scheme 'in blatant contravention of the Corporations Act.'
Deputy Chair Sarah Court said, 'The NGS companies showed a complete disregard for the Australian financial services laws and denied investors fundamental protections, leaving them exposed to the significant risk of financial losses.
'This was compounded by encouraging people to invest through self-managed superannuation funds, putting their retirement savings outside a licensed regime.
'The licensing regime is designed to ensure people receive proper information about what they're investing in from people who are qualified to provide advice in their best interests, and that their investments are properly managed.
'Investments in crypto-related products like blockchain mining may be regulated under financial services laws and it is incumbent on companies or individuals offering these products to Australian investors to ensure they comply with the law,' Ms Court said.
In deciding to wind up NGS Group, the Court held that investors were harmed by NGS Group's failure to hold an AFS licence and found that there is a wholly justifiable lack of confidence in the conduct and management of NGS Group.
In relation to NGS Crypto, the Court found that NGS Crypto carried on a business in contravention of the Corporations Act at the expense of hundreds of investors. Her Honour Acting Chief Justice Collier held that 'after becoming aware of ASIC's concerns regarding its operations, the controller of NGS Crypto did not rectify the fatal flaws in its operations. In those circumstances, I have no confidence in the conduct and management of NGS Crypto in respect of its affairs.'
