NGS Crypto in happier times

NGS Crypto Pty Ltd is an Australian digital asset investment firm based in Sydney that was founded in 2017. The company specializes in providing cryptocurrency investment services to both retail and institutional clients. The company's senior executives include Brett Mendham, who serves as the Managing Director, and Ryan Brown, who is the Chief Operating Officer.

In March 2023, the Australian Securities and Investments Commission (ASIC) announced that it had initiated civil penalty proceedings against NGS Crypto, Mendham, and Brown for alleged breaches of financial services laws. The regulator accused the firm of providing financial services without holding an Australian Financial Services License (AFSL) or an appropriate exemption.

According to ASIC's statement, NGS Crypto had been operating without authorization since at least July 2021, despite being aware of their obligations to obtain a license or an exemption. The company had reportedly marketed and sold cryptocurrency investment products to over 1,000 retail clients, raising approximately AUD 30 million (around USD 21 million) in total.

ASIC also alleged that Mendham and Brown were knowingly involved in the unlicensed provision of financial services by NGS Crypto. The regulator claimed that they had failed to take reasonable steps to ensure that the firm complied with the necessary regulatory requirements.

The announcement of the civil penalty proceedings came after a joint operation between ASIC and the Australian Federal Police (AFP), which involved searches of NGS Crypto's offices in Sydney and Melbourne. The AFP also seized various electronic devices as part of their investigation into potential criminal offenses related to the unlicensed provision of financial services.

NGS Crypto and its executives have not yet responded publicly to the allegations. The ASIC statement did not provide any further details about the potential penalties or timeline for the proceedings.

This incident marks a significant setback for NGS Crypto, which had previously gained a reputation as a leading player in the Australian cryptocurrency investment space. The company had attracted a large client base through its innovative investment products and strong marketing efforts. However, the lack of regulatory compliance has now put the firm's future in jeopardy.

It is important to note that the allegations made by ASIC are just that – allegations – and the defendants have not yet had an opportunity to respond to them in a court of law. The outcome of the civil penalty proceedings remains to be seen.

In the meantime, potential investors are advised to exercise caution when dealing with unlicensed financial services providers, especially those offering investments in complex and volatile assets like cryptocurrencies. It is essential to ensure that any investment firm or individual offering financial services is properly licensed or exempted from the requirement to hold a license.

Update (April 12, 2023):

NGS Crypto's Managing Director, Brett Mendham, has responded to the ASIC allegations in a statement issued to media outlets. In the statement, Mendham acknowledged that NGS Crypto had not held an AFSL but claimed that the company had believed it was exempt from the requirement due to certain provisions of the Corporations Act 2001. He also stated that the company had engaged legal advice to support this belief.

Mendham further stated that NGS Crypto had applied for an AFSL in late 2022 but had not yet received a decision from ASIC. He also announced that the company had ceased all new client acquisitions and was cooperating fully with ASIC's investigation.

ASIC's statement did not mention any allegations of criminal activity related to NGS Crypto's operations, but Mendham's statement confirmed that the AFP had executed search warrants at the company's offices as part of their investigation into potential criminal offenses.

The ASIC statement did not provide any further details about the potential penalties or timeline for the civil penalty proceedings against NGS Crypto, Mendham, and Brown. The outcome of the proceedings remains to be seen.

Update (April 24, 2023):

ASIC has announced that it has obtained interim injunctions against NGS Crypto, Brett Mendham, and Ryan Brown, preventing them from providing financial services without holding a valid AFSL or an appropriate exemption. The injunctions will remain in place until the conclusion of the civil penalty proceedings.

ASIC also announced that it had obtained a freezing order to preserve NGS Crypto's assets, which will be used to