Scam alert: Australia warns of self-managed superannuation funds investing in crypto

As a consequence of the spike in scams, ASIC has recently shut down unlicensed financial services business A One Multi Services Pty Ltd, which seems to have received $2.4 million from investors.

The Australian Securities and Investment Commission (ASIC) has warned investors of marketing efforts pushing Australians to switch from retail and industry superannuation funds to self-managed superannuation funds (SMSFs) containing crypto assets.

The financial regulator has noticed a spike in marketing directing retail investors to SMSFs so they can invest in a ‘high return’ portfolio, namely targeting the SMSF trustees to invest in crypto.

For the last couple of years, ASIC has increased its investigative focus on superannuation funds as they show a tendency for attracting scammers.

Given the high risk nature of crypto, the regulator is recommending superannuation fund members to seek advice from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF.

“Setting up an SMSF is one of the most significant decisions you can make relating to your retirement savings. Before making the decision to set up an SMSF, seek advice from a licensed financial adviser. Do not rely on social media ads or online contact from someone promoting an ‘investment opportunity’”, the announcement stated, adding that investors should be wary of people ‘cold calling’, text messages and emails that ask investors to invest in crypto via SMSFs.

ASIC calls Australians who decide to self-manage their super to seek advice because as the trustee of their SMSF, investors ultimately bear responsibility for the fund’s decisions and for complying with the law. There are rules governing investments the SMSF can make and taxation consequences for investments, including cryptocurrencies.

As a consequence of the spike in scams, ASIC has recently shut down unlicensed financial services business A One Multi Services Pty Ltd, which seems to have received $2.4 million to buy crypto-assets.

Having obtained interim orders and injunctions from the Federal Court in Queensland against the firm and its directors Aryn Hala and Heidi Walters, ASIC states that director Aryn Hala offers users to invest their superannuation in an SMSF and then loan the money in their SMSF to A One Multi, with the promise to receive annual investment returns of over 20%.

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In November, ASIC introduced guidelines for product issuers and market operators in regard to crypto-asset exchange traded products (ETPs) and other investment products.

Australia’s financial watchdog has issued these information sheets on how entities can meet their regulatory obligations a few days after the Senate Select Committee on Australia as a Technology and Financial Centre released recommendations on developing an Australian regulatory framework for crypto-assets.

The Australian Securities and Investments Commission has covered good practices for market operators in how they admit and supervise these products, and good practices for product issuers in how they establish and operate these products.

Crypto ETP product issuers and market operators must learn the good-practice guide that includes admission and monitoring standards, custody of crypto-assets, pricing methodologies, disclosure, and risk management.

The guidelines can be found here:  Information Sheet 225 Crypto-assets (INFO 225) and Information Sheet 230 Exchange traded products: Admission guidelines (INFO 230).

As to entities that intend to hold underlying assets that comprise crypto-assets, these will need to acquire a crypto asset license (INFO 225). ASIC has recently introduced a new ‘crypto-asset’ category in the licensing application.

“Crypto-assets have unique characteristics and risks that must be considered by product issuers and market operators in meeting their existing regulatory obligations. The good practices we published provide practical examples of how these obligations may be met, in a way that maintains investor protections and Australia’s fair, orderly and transparent markets”, said ASIC Commissioner Cathie Armour.