Yet another chapter has been added to the ongoing story of digital assets-related cases, with the Full Federal Court of Australia recently delivering its decision in Australian Securities and Investments Commission v Wallet Ventures Pty Ltd [2025] FCAFC 93 (Appeal).
The key issue the Appeal considered was whether the Earn product marketed by Finder Wallet Pty Ltd (Finder) between 26 February and 10 November 2022 was a “debenture”, as that term is defined in s 9 of the Corporations Act 2001 (Cth) (Corporations Act), and therefore potentially a financial product regulated under the Corporations Act. The dispute related to the characterisation of Finder Earn, not the nature or operation of the product.
To understand the outcome of the Appeal and what it means for businesses innovating now, here’s a quick refresher of Finder Earn.
How did Finder Earn work?
The case concerned Finder’s “Earn” product, which purported to allow a customer to make a loan to Finder in return for earning interest. Functionally, this consisted of the following steps undertaken by the customer:
Step 1: Pre-funding their Finder Wallet with AUD (which could be used for a number of different Finder services).
Step 2: “Transferring and converting” to the Earn product, which meant:
- Finder converted some of the customer’s AUD to TrueAUD, a stablecoin; and
- the TrueAUD was allocated to the Earn product.
Step 3: Being repaid any lent TrueAUD and any accrued (but unpaid) yield on expiry of the term, which was achieved by:
- converting the TrueAUD to AUD; and
- crediting the AUD to the customer’s Finder Wallet.
Under the Finder Earn Terms & Conditions, this loan of TrueAUD to Finder would earn the customer a fixed yield of 4.01% p.a., to be notionally paid by recording an accrual of TrueAUD equivalent to the interest rate.
What were the grounds of appeal?
The Appeal revolved around the classification of Finder Earn as a “debenture”. The term “debenture” is defined in s 9 of the Corporations Act relevantly to mean:
debenture of a body means a chose in action that includes an undertaking by the body to repay as a debt money deposited with or lent to the body. The chose in action may (but need not) include a security interest over property of the body to secure repayment of the money.
The primary judge in Australian Securities and Investments Commission v Finder Wallet Pty Ltd [2024] FCA 228 (Primary Judgment) previously held that Finder Earn was not a debenture as:
- there was no money deposited with, or loaned to, Finder; or
- if there was, it was doubtful that such a deposit or loan formed part of Finder’s working capital.
For more detail on the Primary Judgment, see our earlier blog.
ASIC appealed the Primary Judgment in relation to the debenture finding on two main grounds:
1. “Debenture” Classification:
ASIC argued that Finder Earn involved a loan or deposit of money by customers to Finder Wallet because the Primary Judgment should have concluded that Steps 1 to 3 above should be viewed as a single arrangement. ASIC believed this was the case, because the conversion of AUD to TrueAUD was “both in point of effect and from the investor’s perspective, a single and indivisible action, a loan of money to” Finder. That is, there was no ability for the customer to convert AUD to TrueAUD without also lending to Finder and there was no ability for a customer to deposit their own TrueAUD for lending.
ASIC also argued in the alternative that it was reasonable to assume that Finder and the customer considered Steps 1 and 3 to be a single arrangement because of statements in the terms and FAQs. ASIC particularly drew attention to the fact that there was always a 1:1 conversion from AUD to TrueAUD, meaning that there was never any exchange rate risk and the only benefit was the return from the loan.
If either of these views were taken, this would mean the product was a debenture under the Corporations Act, triggering AFS licensing and debenture disclosure obligations.
2. Obligation to repay as a debt:
ASIC also claimed that the Primary Judgment should have concluded that Finder had undertaken to repay the funds as a debt, which would again make it a debenture regardless of how the funds were used because of previous case law that argued that there is no requirement for the money deposited with, or lent to, Finder to be used by Finder as working capital, or, in the alternative, the funds were actually used as working capital. The Court ultimately did not consider this ground of appeal.
In short, ASIC’s case was that Finder Earn was a financial product that should have been regulated like other financial products.
Why was the Appeal dismissed?
The Full Federal Court dismissed the Appeal citing both factual and legal grounds.
ASIC maintained a belief that the deposit of fiat (i.e. Step 1) was intrinsically linked with the subsequent purchase and transfer of TrueAUD (i.e. Step 2). The Appeal, however, noted that, in narrowing its view in this regard, ASIC was ignoring the fact that customers are able to pre-fund their wallet for a range of purposes not limited to just the Finder Earn product. Specifically, they could easily do nothing and have their money returned to them or access other services (including the exchange services).
The Court found this very influential, as it could not be argued that that the deposit of money into the Finder Wallet was part of a single arrangement together with the conversion to TrueAUD, as the customer had too many options available to them for the use of the funds in the Finder Wallet.
It was agreed by ASIC and Finder in the Primary Judgment that TrueAUD was not money but a form of property. This meant that the loan of TrueAUD by the customer to Finder could not be taken to be a “money debt” as it would better be described as a loan of fungible intangible property. The Court instead argued that this arrangement is more analogous to securities lending.
ASIC contended that “the investor lent money to, or deposited money with, [Finder] on using the Finder Earn product and entering into a single arrangement to acquire TAUD and transfer and allocate that TAUD to [Finder]” on the basis that using the Finder Earn product was the primary purpose for which the fiat was transferred to the platform in the first place.
However, the court held that this characterisation ignores the broader options available to a customer in Step 1 and, without Step 1 forming part of the single arrangement, it is not possible to conclude that money was deposited or loaned. This is because the loaned TrueAUD is not money, it is property, and the only other possible “loan” is when fiat is deposited in the Finder Wallet, and the court held that this action was a separate and distinct step from using Finder Earn.
ASIC’s alternative argument, a construction of what a “single arrangement” is under the Corporations Act, does not change the analysis of the Court.
What does all of this mean?
This was one of ASICs biggest digital assets cases and has broad implications:
For industry
- The structure of a product matters.
- Terms and Conditions and FAQ documents should be clear and concise to customers.
We also addressed a similar point in our recent Block Earner blog.
For ASIC
- This is ASIC’s second major loss in court on crypto yield products following the Block Earner case earlier this year (for which it is currently seeking leave to appeal to the High Court).
- ASIC has not published the final version of its industry guidance in INFO 225 and this may prompt ASIC to revisit its guidance and its regulatory approach.
- ASIC may consider its rights of appeal on this matter.
For consumers
- Customers should understand the product they are investing in and any risks associated with it.
- It is important that any customer undertakes appropriate due diligence before making an investment.
- The main thing consumers need to keep in mind is that unregulated products don’t have the benefit of all the regulatory protections that apply to financial products and licensees who issue them.
Final thoughts
The dismissal of ASIC’s appeal against Finder Earn sets an important precedent for Australia’s digital finance space. It reaffirms that not all crypto-based returns equal regulated investments.
The line between regulated financial product and unregulated offering continues to be a fine one. It is important to tread carefully and ensure that product issuers are clear and open with customers about what they’re investing in.
If you would like to dive deeper into this judgment, or explore how it applies to you, please get in touch with the Hamilton Locke team.
For more information, please contact Jaime Lumsden, Michele Levine and Nicholas Pavouris.
