Hundreds of Australian investors are facing significant financial losses after three cryptocurrency mining companies, collectively known as NGS companies, collapsed, leaving over $160 million AUD ($104 million USD) unaccounted for.
The Australian Security and Investments Commission (ASIC) launched civil proceedings against NGS companies (NGS Crypto Pty Ltd, NGS Digital Pty Ltd, and NGS Group Ltd) and their directors, Brett Mendham, Ryan Brown, and Mark Ten Caten, on April 12. The companies are accused of targeting Australian investors and convincing them to establish self-managed superannuation funds (SMSFs) which were then allegedly converted into cryptocurrency for investment in blockchain mining packages with promised fixed returns.
ASIC alleges that roughly 450 investors entrusted a total of $62 million AUD ($40 million USD) to NGS companies. The companies are further accused of operating without the necessary Australian financial licenses.
Concerns Over Digital Assets and Regulatory Action
ASIC expressed concerns that digital assets invested in blockchain mining could be dissipated. The financial watchdog successfully petitioned the Federal Court to appoint liquidators specifically to manage NGS companies’ digital currency holdings. Additionally, Mendham has been barred from leaving Australia, and ASIC is seeking to prevent NGS companies from offering financial services without proper authorization.
ASIC Chair Joe Longo urged Australians to exercise caution when investing their SMSFs in cryptocurrency. He emphasized the commission’s commitment to scrutinizing crypto products to ensure investor protection through regulatory compliance.
Another Australian Crypto Firm Faces Liquidation
Another Australian cryptocurrency entity, DCA Capital (along with Digital Commodity Assets Pty Ltd and the Digital Commodity Assets Fund), is also facing liquidation and federal court proceedings. Concerns from investors regarding mismanagement, lack of proper licenses, and potential breaches of managed investment scheme regulations prompted the action.
Liquidators appointed for DCA Capital, KordaMentha, discovered debts totaling $100 million AUD ($65 million USD) owed to 100 investors. The Federal Court has frozen the assets of DCA Capital’s director, Ashod Balanian, to the value of $55 million AUD ($36 million USD), and he has been instructed to surrender his passport.
Increased Scrutiny in Australia’s Crypto Landscape
These events highlight the growing focus of Australian regulators on the cryptocurrency industry. In March 2024, ASIC Commissioner Alan Kirkland emphasized the need to address the “regulatory trilemma” for financial innovation, balancing consumer protection, market integrity, and fostering financial innovation.
Australia is positioned as a potential hotspot for cryptocurrency adoption, with stablecoins and favorable policy shifts potentially sparking a surge in demand. However, these recent incidents underscore the need for clear regulations and investor education in this rapidly evolving space.
About The Author
