Anika Begay
A press release issued today by the Australian Securities and Investments Commission (ASIC) has revealed that the country’s largest stock market operator, ASX Limited, is now facing legal challenges following the operator’s alleged misleading statements about its suspended blockchain project.
Originally intended to overhaul ASX’s antiquated system of managing shares and settlement, the blockchain project was abruptly shut down in late 2022, sparking scrutiny and legal backlash. The ASIC statement reads:
ASIC has commenced proceedings in the Federal Court against Australia’s largest market operator, ASX Limited, over alleged misleading statements about its proposed replacement of the Clearing House Electronic Subregister System (CHESS).
Blockchain Project: The Root of the Matter
ASIC’s assessment of the press release reveals that the lawsuit specifically highlights statements made by the ASX in February 2022, which “optimistically” stated that the blockchain initiative was “on track to go live” in April 2023 and “progressing well”.
However, ASIC argues that these claims were “unfounded” and “misleading”, as internal assessments painted a different picture during that period. The regulator noted:
ASIC argues that these statements implied that the project was following the project plan announced by ASX and was on track to meet future milestones, including “go-live” in April 2023. ASIC argues that these statements were misleading and deceptive because, at the time of the announcements, the project was not following the plan and ASX had no reasonable basis to imply that the project was on track to meet future milestones.
In particular, the problem began when an external review conducted by consultancy firm Accenture highlighted several design flaws and material challenges, contradicting public assurances provided by ASX.
In November 2022, the situation escalated when ASX decided to suspend the blockchain project after the worrying findings of Accenture’s audit became clear.
The pause was prompted by growing concerns that the technology would not meet its intended milestones, a significant deviation from the timeline ASX had shared with investors and the market.
Commenting on the matter, ASIC Chairman Joe Longo said:
Companies and market participants rely on what the ASX says about their operations to make their decisions and investments. We expect the ASX to be a place to list and invest with confidence. When the ASX fails to meet its objectives, the consequences for the market are far-reaching.
Response to the cause
So far, the regulator is seeking a variety of remedies against ASX, including misconduct claims, financial penalties, and a negative publicity order to address and rectify misleading statements about the blockchain project.
Meanwhile, ASX responded to the lawsuit with an acknowledgement of the seriousness of the allegations and a commitment to a thorough investigation of the claims. Helen Lofthouse, ASX’s managing director and CEO, said:
We recognise the importance and seriousness of these proceedings. We have cooperated fully with ASIC’s investigation and are now carefully reviewing and assessing the allegations.
Following news of the lawsuit, the share price of ASX Limited fell by almost 3% on the day.
Featured image created with DALL-E, chart from TradingView
