Corporate
Block Earner wins landmark Federal Court Appeal against ASIC
23 Apr 2025
Court overturns key findings, confirming crypto lending product was not a financial product under law
Sydney, 23 April 2025 – In a decisive victory for Australia’s digital asset industry, the Federal Court of Australia has ruled in favour of Block Earner (Web3 Ventures Pty Ltd), overturning prior findings that its now-closed Earner product constituted a managed investment scheme or financial investment facility under the Corporations Act 2001 (Cth).
The Court also dismissed ASIC’s appeal to impose penalties on Block Earner, ordering the corporate regulator to pay the company’s legal costs, including those incurred during the original trial and appeal.
This judgment conclusively sets aside all declarations of contravention made against Block Earner and affirms that the Earner product was not a financial product requiring an Australian Financial Services Licence (AFSL).
Commenting on the Court’s findings, Charlie Karaboga, CEO and Co-Founder of Block Earner, said:
“We are pleased with the Court’s decision, which vindicates our position and confirms that we acted honestly and in good faith. From the outset, we sought to ensure that our modern product suite could fit into a less-modern regulatory environment.
“The Court initially found no penalty was warranted, yet ASIC sought to appeal that decision, placing further stress on our company.”
The Court, upon appeal, found that:
- The ASIC appeal be dismissed.
- The Block Earner cross-appeal be allowed.
- The declarations of contravention made by the primary judge be set aside.
- The proceeding be dismissed.
- ASIC pay Block Earner’s costs.
The critical elements of the decision were:
- Block Earner’s customers loaned cryptocurrency under fixed terms, receiving interest in return. There was no pooling of contributions for the purpose of generating financial benefits for members, which is essential for a managed investment scheme.
- Customers had no exposure to Block Earner’s business performance, nor rights to returns beyond the agreed interest.
- Block Earner’s terms clearly stated it could use funds at its sole discretion, and customers had no intention or expectation of benefiting from those uses.
- ASIC’s reliance on early marketing FAQ language was insufficient to override the contractual structure created by the terms to which customers agreed, which clearly framed the product as a loan, not a financial investment or scheme.
This decision also confirms that Block Earner is under no obligation to pay any penalties, and that the Earner product did not fall within the scope of financial product regulation.
“This case highlights the importance of ensuring regulations evolve alongside technology,” added James Coombes Co-Founder and CCO of Block Earner. “Without modernised guidance, Australia risks losing fintech innovation to offshore markets more supportive of responsible crypto entrepreneurship.”
Block Earner voluntarily closed the Earner product in November 2022 and has no intention to reintroduce it, despite today’s ruling confirming it was not a regulated financial product of the kind alleged by ASIC.
The case has been closely watched across the fintech sector as a test of how Australia’s financial services laws apply to blockchain products.
“Over 4 million Australians have exposure to cryptocurrency. As a nation of early tech adopters, we deserve frameworks that are both protective and enabling,” said Coombes. “Block Earner remains committed to building trusted, transparent, and compliant financial products for everyday Australians.”
Block Earner is an AUSTRAC-registered digital asset provider and has evolved its product suite post-2022 to align fully with regulatory expectations, continuing to deliver market-leading crypto solutions while maintaining ongoing dialogue with regulators and policymakers.
