A press release Reports published earlier today by the Australian Securities and Investments Commission (ASIC) 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 temporarily suspended blockchain project.
The project was originally set to revamp the ASX’s legacy share ownership and settlement system, but was abruptly halted in late 2022, sparking scrutiny and legal consequences. ASIC said in a statement:
ASIC has commenced proceedings in the Federal Court against Australia’s largest market operator, ASX Limited, over allegations of misleading information relating to the Clearing House Electronic Sub-Registration System (CHESS) replacement project.
Blockchain Project: The Root of the Matter
An assessment of ASIC’s press release reveals that the lawsuit specifically highlights statements made by the ASX in February 2022, which “optimistically” claimed that the blockchain initiative was “on track to launch” in April 2023 and “progressing well.”
However, ASIC claims these claims are “unfounded” and “misleading”, with internal assessments painting a different picture during that period. The regulator noted:
ASIC alleges that these statements indicated that the project was progressing in accordance with ASX’s announced project plan and was on track to meet future milestones, including “going live” in April 2023. ASIC alleges that these statements were misleading and deceptive because at the time of the announcements, the project was not progressing according to plan and ASX had no reasonable basis to suggest that the project was on track to meet future milestones.
It is worth noting that the problem initially began when an external review conducted by consulting firm Accenture revealed several design flaws and major challenges, contradicting the public assurances made by the Australian Stock Exchange.
In November 2022, the situation escalated when the ASX decided to pause the blockchain project after the worrying findings of the Accenture review became clear.
The pause comes amid growing concerns that the technology will not meet its target milestones, a significant departure from the timeline the ASX has shared with investors and the market.
Commenting on the issue, ASIC Chairman Joe Lungu said:
Businesses 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 fails, it has far-reaching consequences across the market.
Responding to the lawsuit
So far, the regulator is seeking various remedies against ASX, including misconduct declarations, financial penalties, and an order for negative publicity to address and correct misleading statements about the blockchain project.
Meanwhile, ASX has She replied The company has acknowledged the seriousness of the allegations and has pledged to conduct a comprehensive review of the claims. Helen Loftus, Managing Director and Chief Executive of the ASX, said:
We recognise the importance and seriousness of these actions. We have fully cooperated with ASIC’s investigation and are now carefully reviewing and considering the allegations.
Following news of the lawsuit, the ASX Limited share price has seen a drop over the past day, down by around 3%.
Featured image created using DALL-E, chart from TradingView