ASIC announces action on misleading or deceptive conduct in ICOs
ASIC has already taken action against suspicious ICOs.
ASIC chairman John Price recently warned that Australian consumer law would apply to ICOs, even if they were extended from overseas. On 1 May ASIC announced that this would start taking the form of a crackdown on deceptive or misleading conduct by ICOs, which is prohibited under the Australian Consumer Law and the ASIC Act.
It has started issuing inquiries to ICO issuers and their advisers where it has identified conduct or statements that may be misleading or deceptive. "This is in addition to our inquiries where we identify potentially unlicensed conduct," it said.
The inquiries have already seen some token issuers stop their ICOs, or say that they will be modifying their ICO structure to comply with Australian law.
"If you are acting with someone else’s money, or selling something to someone, you have obligations. Regardless of the structure of the ICO, there is one law that will always apply: you cannot make misleading or deceptive statements about the product. This is going to be a key focus for us as this sector develops," Price said.
The ASIC release gives the specific example of an identified violation, where it took action to protect investors from an ICO whose structure, offeror and whitepaper disclosures raised fundamental concerns.
"In addition to potentially misleading statements in the white paper, the offer was an unregulated managed investment scheme," ASIC says. "This means the offeror would have been in breach of the relevant provisions of the Corporations Act had the offer proceeded, potentially leading to serious penalties under the act."
The crypto-space has been rife with "managed investment" type scams even outside of ICOs, but it has also presented some novel interpretations of managed investments, such as Iconomi Digital Asset Arrays. Elsewhere in fintech, robo-advisors have been helping people invest, and there's no shortage of projects that aim to turn AI loose on cryptocurrency markets.
With so many grey areas and unusual use cases emerging, it might be little surprise that ASIC is looking to the fundamentals of Australian consumer law, and specifically taking action against clear examples of misleading and deceptive conduct.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO