On 18 December 2025, the Federal Court of Australia delivered its judgment on Australian Securities and Investments Commission v NGS Crypto Pty Ltd (No 5) [2025] FCA 1611, ordering the winding up of two (2) cryptocurrency related entities after finding that they operated an unlicensed financial services business and an unregistered managed investment scheme in contravention of the Corporations Act 2001 (Cth) (Act).
The decision forms part of ongoing enforcement proceedings brought by the Australian Securities and Investments Commission (ASIC) against entities associated with the “NGS” crypto mining investment model and provides important guidance on the application of Australia’s financial services regime to crypto-asset investment arrangements
Overview of proceedings
ASIC commenced proceedings against entities associated with the promotion and operation of a crypto asset mining investment model, including:
- NGS Crypto Pty Ltd ACN 624 825 065
- NGS Digital Pty Ltd ACN 630 115 543; and
- NGS Group Ltd (a Hong Kong incorporated entity).
- Together the Respondents
ASIC alleged that the Respondents promoted and operated a cryptocurrency mining investment scheme offered to Australian investors and:
- carried on a financial services business in Australia without holding an Australian financial services licence (AFSL);
- operated an unregistered managed investment scheme; and
- in the case of the foreign entity, carried on business in Australia without being registered as a foreign company.
ASIC sought declaratory relief, permanent injunctions restraining further contraventions, and orders winding up the Australian corporate respondents.
Nature of the investment arrangements
The investment offering involved the promotion of “blockchain mining” or “crypto mining” packages to investors, including Australian retail investors and, in some cases, self-managed superannuation funds (SMSFs).
Under the arrangements:
- investors contributed funds to acquire mining packages;
- the respondents purported to deploy investor funds in crypto mining activities; and
- investors were promised returns derived from mining activities, often described as passive or fixed rate income.
Investors had no day to day control over mining operations and relied on the respondents to deploy capital, operate infrastructure and distribute returns. The respondents contended that they were providing technology related services associated with crypto mining rather than financial services.
Key issues before the Court
The Court considered whether:
- the respondents were carrying on a financial services business in Australia without an AFSL, contrary to section 911A of the Act;
- the arrangements constituted a managed investment scheme required to registered under Chapter 5C of the Act;
- the foreign entity was carrying on business in Australia without registration; and
- it was appropriate to grant winding up orders on just and equitable grounds.
Financial services business without a licence
The Court held that the respondents were carrying on a financial services business by issuing and promoting interests in an investment arrangement and dealing in financial products.
In reaching that conclusion, the Court emphasised that the characterisation of the arrangement depends on its substance rather than the description. The use of terminology associated with technology or crypto mining did not prevent the arrangements from constituting financial products where investors contributed funds in expectation of financial returns derived from the efforts of others.
As none of the respondents held an AFSL, the court found contraventions of section 911A of the Act.
Unregistered managed investment scheme
The Court also found that the investment arrangements satisfied the statutory definition of a managed investment scheme.
In particular:
- investors contributed money or money’s worth;
- contributions were pooled or applied in common enterprise involving crypto mining activities; and
- investors did not have day to day control over the operation of the scheme.
The Court rejected the proposition that the arrangements were merely contracts for services or access to equipment. Instead, they exhibited the essential characteristics of a managed investment scheme requiring registration.
As the scheme was not registered, the respondents contravened the managed investment scheme provisions of the Act.
Foreign entity carrying on business in Australia
The Court found that the Hong Kong incorporated entity was carrying on business in Australia through its involvement in promoting and operating the investment scheme. The failure to register as a foreign company constituted a further contravention.
Relief and winding up
The Court granted:
- declarations of contravention;
- permanent injunctions restraining the respondents from carrying on a financial services business or operating managed investment schemes; and
- orders winding up NGS Crypto Pty Ltd and NGS Digital Pty Ltd on just and equitable grounds.
In ordering the winding up the entities, the Court emphasised:
- the seriousness of operating an unlicensed financial service business;
- the risks posed to investors; and
- the public interest in maintaining the integrity of Australia’s financial services regulatory regime.
The Court accepted that winging up was appropriate to protect investors and prevent further non-compliant conduct.
Significance of the decision
Crypto asset investment arrangements are subject to existing financial services law
Where investors contribute funds in expectation of returns generated by others, the arrangement may constitute a financial product and managed investment scheme regardless of its association with digital assets.
Substance prevails over terminology
Characterising an arrangement as “crypto mining” or technology services will not avoid the application of the Act where the substantive elements of regulated investment scheme are present.
ASIC will seek structural remedies
The case demonstrates ASIC’s willingness to pursue injunctive relief and winding up orders where unlicensed crypto investment schemes expose Australian investors to risk.
Takeaways for crypto and fintech businesses
Businesses operating in the crypto asset and digital investment sector should carefully assess whether their activities:
- constitute the provision of financial services;
- involve interest in managed investment schemes; or
- require licensing, registration or disclosure under the Act.
Reliance on technological characterisations or offshore structuring will not avoid regulatory obligations where the substantive feature of an investment scheme are present.
Early legal advice and appropriate structuring remain critical to mitigating regulatory risk.
Links and further references
Legislation
Australian Securities And Investments Commission Act 2001 (Cth)
Cases
Australian Securities and Investments Commission v NGS Crypto Pty Ltd (No 5) [2025] FCA 1611
Further information
If you need advice on compliance obligations of your technology business, contact us for a confidential and obligation‑free discussion.
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances
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