Australia Regulator Sues ASX over Blockchain Project
By Vukan Ljubojevic | TH3FUS3 Senior Writer
August 14, 2024 10:26 AM
Reading time: 1 minute, 35 seconds
TL;DR Australia's corporate regulator ASIC has taken legal action against market operator ASX for alleged mishandling of the blockchain-based CHESS replacement project. The lawsuit claims ASX misled the market about the project's progress, resulting in significant financial losses.
ASIC Takes Legal Action
Australia's corporate regulator ASIC has sued market operator ASX for allegedly mishandling the replacement project for the blockchain-based Clearing House Electronic Subregister System (CHESS). The lawsuit, announced on Wednesday, claims ASX misled the market about the project's progress.
Misleading Market Statements
The lawsuit alleges that in early 2022, ASX stated the project was on track. However, just six weeks later, ASX revealed the project was likely to be delayed. This sudden shift raised questions about the transparency of the company's communications.
Independent Review Uncovers Issues
Later, in 2022, ASX commissioned an independent review via Accenture. The review uncovered significant issues with the scalability of the blockchain technology underpinning the new CHESS system. These problems led to the project's halt and a massive $250 million write-off.
'ASX's statements go to the heart of trust in the integrity of our markets,' said ASIC Chair Joe Longo.
A History of Setbacks
CHESS, introduced in 1994, has been the backbone of ASX's share ownership recording and trade processing. ASX began developing its replacement in 2015 and adopted blockchain technology in 2017.
Despite multiple setbacks, ASX claimed in February 2022 that the new system would be operational in 2023. The regulator alleges that ASX was aware of the delays but publicly declared otherwise, creating a false impression.
Market Trust Undermined
ASIC Chair Joe Longo emphasized that ASX's misleading statements undermined market trust. 'Companies and market participants rely on what the ASX says about its operations to make their own decisions and investments,' Longo stated.
He added that the project's delay and eventual halt in November 2022 resulted in substantial financial losses for ASX and its investors.
ASX's Response
ASX CEO Helen Lofthouse acknowledged the seriousness of the lawsuit. She said the bourse operator is cooperating with the regulator's investigation and reviewing the allegations.
While ASIC has not specified the penalty it seeks, ASX paid an A$1.05 million fine in March 2024 for separate market integrity rule breaches.
