NGS Crypto in happier times

NGS Crypto Pty Ltd, an Australian digital asset investment firm based in Sydney, and two of its senior executives, Brett Mendham and Ryan Brown, have faced civil penalty proceedings initiated by the Australian Securities and Investments Commission (ASIC) for alleged breaches of financial services laws. The announcement was made by ASIC on March 23, 2023.

According to ASIC's statement, NGS Crypto, through its directors Mendham and Brown, provided financial services without holding an Australian Financial Services License (AFSL) or an appropriate exemption. The company offered digital asset investment services to retail clients, which constitutes a regulated financial service under Australian law.

ASIC's investigation revealed that NGS Crypto had been operating since at least 2021, raising funds from retail clients for digital asset investments without proper authorization. The company marketed itself as a digital asset investment fund and claimed to have a team of experienced professionals managing investments in cryptocurrencies and other digital assets.

Mendham, who was listed as the company's managing director, and Brown, who was the chief operating officer, were both involved in the day-to-day operations of the business and were responsible for representing NGS Crypto to clients.

ASIC's statement noted that providing financial services without a valid license or exemption is a serious breach of financial services laws. The regulator is seeking penalties against NGS Crypto, Mendham, and Brown for their non-compliance.

NGS Crypto's website is currently offline, and efforts to contact the company for comment have been unsuccessful. The ASIC statement did not provide any further details about the number of clients affected or the total amount of funds raised by NGS Crypto.

This is not the first time that ASIC has taken action against unlicensed digital asset investment firms in Australia. In recent years, the regulator has stepped up its efforts to enforce financial services laws in the rapidly evolving digital asset market.

ASIC's action against NGS Crypto serves as a reminder to investors to be cautious when dealing with unlicensed firms and to only invest in digital assets through regulated channels. Investors are encouraged to check the ASIC's Financial Services Register to ensure that any firm they are considering investing with holds a valid AFSL or is otherwise authorized to provide financial services in Australia.

Update (March 27, 2023): According to a report from The Australian Financial Review, ASIC is seeking penalties of up to $1 million for each breach against NGS Crypto, Mendham, and Brown. The report also states that ASIC is investigating whether NGS Crypto misappropriated client funds or engaged in other misconduct. The exact number of clients affected is not yet known, but ASIC is believed to be investigating several hundred cases. The report also notes that ASIC is working with international regulators to trace any funds that may have been transferred offshore. The case is expected to go to a public hearing later this year.