Three Australian crypto funds suspended as regulator cites non-compliance

Australia’s main financial markets regulator has placed temporary stop orders on three cryptocurrency-related funds to be offered to retail investors, due to non-compliant target market regulations (TMDs).

In a media release dated October 17 local time, the Australian Securities and Investments Commission (ASIC) said it has placed temporary stop orders on three of Australian asset manager Holon’s crypto funds – which aim to invest in Bitcoin (BTC), Ethereum ( ETH ), and FileCoin (FILE).

A target market determination is a document that describes who a product is suitable for, based on likely needs, goals and financial situation, as well as how the product can be distributed, according to Invest Smart.

In a statement to Cointelegraph, an ASIC spokesperson said the TMDs were “too broad […] given the volatility and speculative nature of crypto markets.”

They added to the regulator’s concern that Holon “has not properly assessed the features and risks of the funds in determining their target markets.”

In its statement, ASIC said it considers the funds not suitable for the broad target market defined in the TMDs, including those with a “medium, high or very high risk and reward profile”, those who intend to use the fund as a ” satellite”. component” — up to 25% of their portfolio, and those who intend to use the fund for 75% to 100% of their investment portfolio.

ASIC added that cryptocurrency funds could see investors exposed to significant negative returns, but stated that the product disclosure statements (PDS) provided by Holon say they could face a “total loss of value.”

“ASIC made the interim orders to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs,” it said, adding that the order will be valid for 21 days unless revoked earlier .

The specifics of what ASIC has asked Holon to change are unclear, and the ASIC spokesperson did not provide further details, but the regulator said it expects Holon to consider the concerns and take immediate steps to ensure compliance.

The temporary suspension will prevent Holon from sharing a PDS, giving general advice about the Funds or issuing units of the Funds to retail investors.

The regulator also expects Holon to address the concerns “in due course” or a final stop order will be issued, although Holon will be given the opportunity to submit notices before such an order is made.

A Holon spokesperson told Cointelegraph that the company is not commenting on the matter “at this stage.”

Related: 1M Aussies to enter crypto in next 12 months – Swyftx survey

The funds, called Holon Bitcoin Fund, Holon Ethereum Fund and Holon FileCoin Fund, are all managed investment schemes that aim to provide exposure to the price of the corresponding crypto and work by investors pooling money who in return receive a relative stake in the scheme. .

In this case, the pooled money is used to buy the digital asset named in the custodial fund managed by Gemini crypto exchange, according to a July blog from the company.