Another Blow for ASIC: Finder Wallet Wins Appeal

Finder Earn

Finder Earn was a crypto-based yield product offering customers a fixed or open-ended return.

As reported in our October 2024 update, to access the product, customers needed to download the Finder App, apply for a “Finder Wallet account” to access Finder’s digital currency exchange services and fund the wallet with Australian dollars (AUD). Within the Finder App, users could then select the “Transfer and Convert” option to exchange part of their AUD balance into TrueAUD, a stablecoin pegged 1:1 to AUD, and transfer that TrueAUD to Finder. In exchange for legal title to the TrueAUD, Finder was contractually bound to return the TrueAUD plus an additional amount calculated in accordance with Finder’s prevailing published rate of return.

The Legal Issue

The question was whether or not Finder Earn was a debenture. Under section 9 of the Act, a debenture involves an undertaking to repay money that has been deposited with or lent to a body. However, the complexity in relation to Finder Earn was what activities constituted the transaction that could be a debenture.

ASIC submitted that, under the Finder Earn terms, the entire Transfer and Convert process, from converting AUD to TrueAUD and allocating it to Finder, should be treated as a single arrangement, or be deemed to be a single arrangement under section 761B of the Act, effectively ignoring the conversion step. Under section 761B of the Act, if it is reasonable to assume that parties to arrangements which are not individually a financial product considered them to be one scheme, and collectively the arrangements meet the definition of a financial product, those arrangements should be treated as a single scheme.

The Decision

The Court rejected ASIC’s argument on several grounds.

Without a deposit or loan of money, the definition of debenture could not be satisfied. The only deposit of money with Finder by a customer was to fund the customer’s Finder wallet. That deposit could be used to access a range of Finder services — not specifically for Finder Earn. Accordingly, the Court did not consider that a customer’s deposit forms part of, and nor did ASIC seek to rely on that deposit forming part of, a single scheme that could constitute a debenture. As that was the only deposit of funds with Finder, the Transfer and Convert process could not satisfy the definition of a debenture.

Further, as part of the Transfer and Convert process, the customer acquired TrueAUD before it was passed to Finder. Having accepted that TrueAUD is not money, its transfer to Finder could not constitute money deposited with or lent to Finder. The Court considered the arrangement more analogous to a securities lending arrangement.

The Court also found that section 761B of the Act does not support the conclusion that Finder Earn is a debenture. For the reasons noted above, it is not reasonable to consider the initial customer deposit part of the Transfer and Convert process which, absent that deposit of money, cannot be a debenture. The Court also recognised the primacy of the Finder Earn terms. Those terms made it clear that TrueAUD, which is not money, was deposited with Finder and they outlined the separate and distinct steps in the Transfer and Convert process, which were consistent with the nature of the product.

Having dismissed ASIC’s first ground, the Court found it unnecessary to consider the second — namely, that for Finder Earn to be a debenture it is not necessary to show Finder used the money received for working capital purposes (a concept discussed in ABN AMRO Bank NV v Bathurst Regional Council).

Conclusions

This decision highlights the legal and regulatory complexities involved in classifying digital asset products under existing financial services laws. It underscores how critical product structuring and legal terms are in determining whether a product falls within the regulatory perimeter.

With the U.S. recently passing the GENIUS Act, the use of stablecoins in financial products is poised to increase globally. If Australian regulators seek to ensure regulatory parity between fiat and stablecoin-based transactions, legislative reform will be necessary.

More broadly, the decision adds weight to calls for greater regulatory certainty in the digital asset sector. Market frustration is mounting over the continued delay of Australia’s digital asset licensing regime — and this case is another reminder that clarity, not case-by-case enforcement, is the key to progress.