Up to $150 million at risk as two Aussie bitcoin schemes go bust

The murky origins of bitcoin date to the height of the financial crisis in 2008.

Two Australian cryptocurrency schemes have collapsed within a week leaving hundreds of investors across the country potentially owed more than $150 million.

The Federal Court on Wednesday ordered cryptocurrency fund operator Ash Balanian – who says in the fund’s investment documents that he is a former NASA mission scientist – to hand up his passport and issued a freezing order over his assets up to the value of $55 million. The freezing order covers his sprawling $7 million home in Ingleside in northern Sydney and four other houses.

Liquidators from KordaMentha have been appointed to three companies operated by Balanian that offered cryptocurrency investments – DCA Capital, Digital Commodity Assets and the Digital Commodity Assets Fund – after concerned investors sought to have the companies wound up.

The application was brought by numerous investors due to concerns held by those investors regarding the management of the fund, failure to hold the required licences to operate the fund and for breaching managed investment scheme requirements.

Those investors had sought the return on their investments in the fund via a redemption process. Some investor requests for redemptions were met by the fund while others were still being worked through at the time of the court action, raising concerns that some investors may be negatively affected by the shutdown of the group’s operations. Balanian’s legal team declined to comment as the matter was before the court but is preparing a full response to the allegations.

Further investigations by liquidators from KordaMentha, Scott Langdon, Jennifer Nettleton and John Mouawad are expected to turn up more investors and that figure is expected to increase significantly in the coming months.

Langdon said KordaMentha’s examination of the Fund so far indicated there may be up to 100 investors owed money and that creditor claims may be up to $100 million. He also said Balanian had not responded to KordaMentha’s request for information, requests for a meeting or engaged to assist KordaMentha in executing their duties.

According to an investor memorandum for the scheme, the American businessman has been a long-time enthusiast of cryptocurrency and was “Command Controller and Mission Planner for the NASA Chandra X-ray Observatory mission, where he was an integral member of the Flight Operations Team”.

The fund was also geared at wealthy investors and required a minimum initial deposit of $50,000 and was seeking to raise as much as $500 million from investors.

Separately, the corporate watchdog announced on Friday that receivers from McGrathNicol had been appointed to blockchain mining companies NGS Crypto, NGS Digital and NGS Group Ltd. The groups are not related to Australian companies NGS Group Pty Ltd or NGS Super.

The Australian Securities and Investments Commission launched civil penalty action against the group and the sole directors of each of those companies – Brett Mendham, Ryan Brown and Mark Ten Caten, also referred to in some online discussion forums as Mark Tencaten. ASIC added in its statement that Mendham has also been restrained from leaving Australia as part of the ASIC action.

ASIC alleges that the NGS businesses encouraged Australian investors to set up self-managed superannuation funds to then invest in blockchain mining packages and cryptocurrency assets. The watchdog’s early investigations indicate more than 450 Australians invested about $US41 million ($62 million) through the NGS businesses.

ASIC chair Joe Longo said Australians who decide to self-manage their super should consider the risks before using their SMSF to invest in crypto-related investment products such as blockchain mining.

“These proceedings should also send a message to the crypto industry that products will continue to be scrutinised by ASIC to ensure they comply with regulatory obligations in order to protect consumers.”

NGS Crypto has been contacted for comment.

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