A media release published earlier today by the Australian Securities and Investments Commission (ASIC) revealed that the country’s largest securities market operator, ASX Limited, is now facing legal challenges following the operator’s alleged misleading statements about its paused blockchain project.
Initially set to revamp ASX’s antiquated shareholding and settlement management system, this blockchain project was abruptly halted in late 2022, sparking scrutiny and legal repercussions. The ASIC release read:
ASIC has commenced proceedings in the Federal Court against Australia’s largest market operator, ASX Limited, for allegedly making misleading statements related to its Clearing House Electronic Subregister System (CHESS) replacement project.
Blockchain Project: The Root Of The Matter
Assessing the media release by the ASIC reveals that the lawsuit particularly highlights statements made by ASX in February 2022, which “optimistically” claimed the blockchain initiative was “on-track for go-live” in April 2023 and “progressing well.”
However, ASIC contends these claims were “baseless ” and “deceptive,” as internal assessments painted a different picture during that period. The regulator noted:
ASIC alleges these statements implied the project was tracking to ASX’s announced project plan and was on track to meet future milestones, including “go-live” in April 2023. ASIC alleges those representations were misleading and deceptive because, at the time of the announcements, the project was not tracking to plan and ASX did not have any reasonable basis to imply the project was on track to meet future milestones.
Notably, the issue initially began when an external review by consulting firm Accenture uncovered several design flaws and substantial challenges, contradicting public assurances by ASX.
In November 2022, the situation escalated when ASX decided to pause the blockchain project after the troubling findings from Accenture’s review became clear.
The pause was made amidst growing concerns that the technology would not meet its targeted milestones, a significant deviation from the timeline ASX had shared with investors and the market.
ASIC Chair Joe Longo commenting on the matter, stated:
Companies and market participants rely on what the ASX says about its operations to make their own decisions and investments. We expect the ASX to be a place to list and invest with confidence. When the ASX falls short, it has wide ranging consequences across the market.
Response To The Lawsuit
So far, the regulator is now seeking various remedies against ASX, including declarations of misconduct, financial penalties, and an order for adverse publicity to address and rectify the misleading statements over the blockchain project.
Meanwhile, ASX has responded to the lawsuit with an acknowledgment of the gravity of the allegations and has committed to a thorough review of the claims. Helen Lofthouse, managing director and CEO of ASX, stated:
We recognize the significance and serious nature of these proceedings. We cooperated fully with ASIC’s investigation and are now carefully reviewing and considering the allegations.
Following the news of the lawsuit, ASX Limited’s stock price has seen a decrease over the past day, down by nearly 3%.
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