An Australian court has ordered NGS Crypto, a crypto retirement company to shut down its services after it discovered discrepancies in its books.
NGS Crypto is a digital asset platform that marketed itself as a crypto-based retirement solution. The federal court order was issued this week, after findings revealed that the Gold Coast-linked group operated an unlicensed financial services business.
According to the court, the digital asset platform also posed what it described as a serious risk to investors and the general public.
Australian court orders crypto platform to halt operations
According to The Australian, NGS Crypto promoted what it called digital mining packages, telling investors that they could earn annual fixed returns of 16%, while also assuring them that their investment would be returned.
The corporate regulator of Australia mentioned that those claims raised immediate red flags, noting that the court found that the company was operating without the required financial services license, breaching securities and consumer protection laws.
Justice Berna Collier ordered the companies to wind up and permanently refrain from offering financial services, citing risks to retail investors and repeated violations of corporate regulations.
The regulator highlighted that more than 450 investors put money into NGS Crypto and related entities over roughly six years. The administrators encouraged many investors to move their retirement savings into the scheme using self-managed retirement accounts similar to self-directed IRAs maintained in the United States.
In her ruling, Justice Berna Collier said that the structure and conduct of the business posed grave risks to investors and warranted immediate intervention. Aside from winding up its operations, the court also permanently ordered the firm to desist from promoting financial products in the future.
Meanwhile, court-appointed liquidators from advisory firm McGrath Nicol have so far identified just $4.4 million in digital assets, a fraction of what they believed investors gave to the firm.
Liquidators face challenges in tracing funds
In filings to the court, the firm warned that recovery efforts have faced major challenges. It claimed that crypto price volatility has affected the price of some of its assets, while others appeared to have been locked in long-term staking arrangements that may not unlock until 2037.
The liquidators have also said that tracing ownership is difficult, noting that investor funds were moved to a single wallet and then across several other wallets, making attribution complex.
Regulators also obtained freezing orders last year to prevent assets from being moved. The orders were obtained against the firm and its directors, Ryan Brown, Brett Mendham, and Mark Ten Caten.
Authorities confirmed that they had seized Mendham’s passport. Ten Caten is believed to be outside Australia, while Brown’s last known address was in Brisbane, according to court records. The orders remain in place as liquidators continue tracing the flow of funds.
Regulators claimed that the investigation was triggered by concerns from some investors that their funds were not being handled as represented by the company.
Justice Collier said the lack of licensing, combined with the scale of funds raised, and the nature of the promises made to investors, justified her decision. She added that the company will remain in that state for the foreseeable future as the investigators continue moves to recover funds.
Sharpen your strategy with mentorship + daily ideas – 30 days free access to our trading program