The Federal Court of Australia has sided with fintech firm Block Earner in an appeal against a ruling that found it was required to hold a financial services license for its now-discontinued crypto-related products. 

Block Earner’s crypto-linked fixed-yield earning product is not a financial product, or a managed investment scheme, and is not a derivative under the Corporations Act, Justices David O’Callaghan, Wendy Abraham and Catherine Button said in an April 22 judgment. 

The trio said Block Earner’s yield product couldn’t be classed as an investment or financial product because users loaned crypto under fixed terms for interest payments and didn’t pool contributions to generate further benefits. The terms and conditions framed it as a loan, and users had no exposure to the firm’s business outside of the agreed interest rate, they added.

A court has dismissed the legal proceedings against Block Earner and ordered Australia’s financial regulator to pay costs. Source: ASIC

The Australian Securities and Investment Commission (ASIC), which first brought the case, has been ordered by the court to pay costs for the proceedings, including appeals. The regulator said in an April 22 press release that it is currently “considering this decision.”

Block Earner’s chief commercial officer, James Coombes, told Cointelegraph the court decision brings clarity that crypto assets shouldn’t be treated differently from other asset classes when applying existing laws. 

“Our product was simply defined as one where customers would lend their assets to us for a fixed return, there was no share in the upside of the pool of assets and as such no Managed Investment Scheme existed,” he said. 

“The fact that it included crypto assets should not alter that simple definition, and I believe this case forms a bedrock for ambitious brands around Australia to build from.”

An ASIC spokesperson declined further comment.

Earner product won’t make a return 

Despite the win in court, Block Earner will not be reviving its Earner product after axing it when legal proceedings began, but Coombes said that “crypto-backed loans products remain the core focus of the company.”

“Regulation going forward is not an easy task, and we empathise with the regulators on this point,” Coombes added. “We hope a collaborative process can bring about positive change.” 

Related: Australia outlines crypto regulation plan, promises action on debanking

ASIC launched civil legal proceedings in November 2022, arguing that Block Earner needed an Australian Financial Services License to offer its three crypto-linked fixed-yield earning products.

In February 2024, an Australian court initially found the fintech firm would need a financial services license to operate its crypto yield-bearing products. 

Another June 2024 ruling released Block Earner from any financial penalties because it had “acted honestly” and pursued its legal opinions before launching the products, which ASIC appealed.

Magazine: SEC’s U-turn on crypto leaves key questions unanswered

The US Securities and Exchange Commission and federal prosecutors have charged a man they allege created a crypto scheme that swindled 90,000 people out of $200 million in the hopes of earning returns from Bitcoin and forex trading.

The SEC said on April 22 that it had charged Ramil Palafox, a dual citizen of the US and the Philippines, claiming he misappropriated over $57 million in investor funds gained through his company, PGI Global, between January 2020 and October 2021.

The regulator alleged Palafox used a multilevel marketing model to execute a “Ponzi-like” scam until the company’s collapse in 2021. The SEC said he lured investors through “false claims of crypto industry expertise and a supposed AI-powered auto-trading platform.”

The SEC claimed Palafox hosted lavish events in Dubai and Las Vegas to recruit new members who were offered referral bonuses to recruit others and used investor funds to pay other investors to further promote the scheme, as well as to line his own pockets.

Excerpt from the SEC’s complaint against Ramil Palafox. Source: SEC

“Palafox attracted investors with the allure of guaranteed profits from sophisticated crypto asset and foreign exchange trading, but instead of trading, Palafox bought himself and his family cars, watches, and homes using millions of dollars of investor funds,” said Scott Thompson, associate director of the SEC’s Philadelphia office. 

The SEC is charging Palafox with violating the anti-fraud and registration provisions of the federal securities laws and is seeking a permanent injunction to ban him from the future sale of securities and crypto assets, repayment of ill-gotten gains and civil penalties. 

Justice Department files twin action

The SEC’s complaint is running parallel to action brought by the US Attorney’s Office for the Eastern District of Virginia, which arraigned Ramil Palafox on criminal charges. 

According to an indictment filed under seal on March 13, federal prosecutors charged Palafox with wire fraud, money laundering and unlawful monetary transactions.

Prosecutors alleged Palafox misled investors with false promises of daily returns ranging from 0.5% to 3% from Bitcoin trading and hid information about PGI’s profitability, licenses, and business activity. 

The indictment said Palafox told investors that substantial returns were being generated via the company’s crypto exchanges and that “his traders were able to make money regardless of whether the price of Bitcoin was going up or down.” 

However, the Justice Department alleged that, in reality, most investors’ money was never used to buy or trade Bitcoin, and many lost some or all of their funds.

Property listed in the indictment that would be forfeited by Palafox if convicted includes over $1 million in cash, 17 vehicles, including two Teslas, a Ferrari 458 Special, two Lamborghinis, and two Porsches, plus a variety of designer bags, wallets, shoes, jewellery and watches.

Related: Crypto crime goes industrial as gangs launch coins, launder billions — UN

Various linked companies were included in the scheme, including the Praetorian Group International Trading Inc., the website for which was seized by the Department of Justice in 2021, leading to its UK-based operations being shut down by the UK’s High Court.  

It’s the agency’s first crypto-related case under its crypto-friendly SEC chair, Paul Atkins, who was sworn in on April 22.

The SEC had brought a case against Nova Labs in January, accusing it of selling unregistered securities by offering devices that mined the Helium (HNT) token. The SEC reached a settlement with Nova Labs in April that resulted in the lawsuit being dismissed and a $200,000 civil penalty.

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US President Donald Trump’s media conglomerate, Trump Media and Technology Group, has signed an agreement with crypto exchange Crypto.com to launch exchange-traded funds “with a Made in America focus.”

Trump Media, which operates the social media site Truth Social, said on April 22 that it signed a binding agreement with Crypto.com and asset manager Yorkville America Digital to launch ETFs, which “are expected to comprise digital assets as well as securities with a Made in America focus spanning diverse industries such as energy.”

The funds will launch through Trump Media’s decentralized finance brand, Truth.Fi, and will be available through Crypto.com’s broker-dealer, Foris Capital. The funds are expected to go live later in 2025, subject to regulatory approval. 

Trump Media plans to invest some of its cash reserves into the ETFs, which will be launched alongside a number of Truth.Fi Separately Managed Accounts. The US law firm Davis Polk will be advising on the development and launch of the products.

The initiative is part of the firm’s financial services and fintech strategy, using up to $250 million custodied by Charles Schwab following a partnership agreement with the bank in January. 

The finalization of the agreement follows Trump Media and Crypto.com signing a non-binding deal in March.

It’s set to be the latest crypto-related venture involving Trump and his family. The Trumps helped launch a crypto platform, World Liberty Financial, in October, which has a linked token and plans for a stablecoin.

President Trump’s sons, Eric Trump and Donald Trump Jr., have also gone in on a crypto mining venture called American Bitcoin.

Spot crypto ETFs rebounding 

Spot Bitcoin ETFs in the US have seen a turnaround in institutional interest, with more than $1 billion in aggregate inflows so far this week as crypto markets rebounded. 

Spot Bitcoin ETF flows turn positive. Source: CoinGlass

Related: Trump’s next crypto play will be Monopoly-style game — Report

It comes after Bitcoin ETFs have been plagued by outflows over the past few weeks as the wider market entered a downturn, as Trump ramped up fears of a trade war with threats of tariffs, which were eventually implemented in early April.

Meanwhile, Crypto.com’s native token, Cronos (CRO), has surged 12% after the company inked the deal with Trump Media, reaching $0.09. However, the exchange token remains down 90% from its 2021 all-time high of just under a dollar. 

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