Australia's Securities and Investments Commission (ASIC) has filed a lawsuit against the Australia Securities Exchange (ASX) Ltd., alleging misleading statements about its blockchain trade settlement project, according to an Aug. 14 announcement .

False statements

ASIC alleges that ASX falsely asserted in February 2022 that its project was “on schedule” for an April 2023 launch and that it was “progressing” when, in fact, it was not. The regulator argued that these statements were misleading since the project was not meeting its goals and was ultimately terminated.

The ASX's blockchain initiative was designed to replace the Clearing House Electronic Subregister System (CHESS). However, ASIC noted that it was discontinued in November 2022 due to design difficulties, and ASX incurred costs of AUD250 million (over $165 million)

ASIC furthered that the project was already experiencing difficulties as of February 2022, despite ASX's optimistic pronouncements. This delay and eventual abandonment resulted in substantial financial losses for the ASX and its market participants.

ASIC Chair Joe Longo stated that the project's failure eroded market integrity and reflected negatively on the ASX board and senior management. He stressed the importance of accurate information for market participants and the widespread ramifications of ASX's missteps.

Longo added:

“Businesses and market participants depend on the ASX's statements about its operations to inform their decisions and investments. We expect the ASX to be a place to list and invest with confidence. When the ASX fails to meet these expectations, it has wide-reaching consequences for the entire market.”

ASIC revealed that the recent issues followed ASX’s payment of AUD1,050,000 (over $660 million) in penalties in March due to shortcomings in compliance with market integrity regulations.

ASX responds

In an Aug. 14 statement, ASX CEO Helen Lofthouse said the company was examining ASIC's allegations and acknowledged “the significance and serious nature of these proceedings.”

She continued :

“We play a vital role in the heart of Australia's financial markets and remain dedicated to supporting and serving our customers. We are committed to advancing ASX and have made significant progress as an organization in the past two years.”

ASX stated that ASIC is seeking declarations, financial penalties, an adverse publicity order, and reimbursement of costs as part of the lawsuit.