The corporate regulator, the Australian Securities & Investment Commission (ASIC), has filed a lawsuit. ASIC has filed a lawsuit against a subsidiary of the comparison website Finder over its recently shut down crypto production, Finder Earn.

ASIC alleges that Finder Wallet Pty Ltd provided unlicensed financial services, violated product disclosure requirements, and failed to comply with design and distribution obligations (DDO) with Finder Earn.

Finder Wallet offered Finder Earn between the end of February and November 10 of this year.

The legal action paints Finder’s sudden announcement late last month that it would close Finder Earn, giving customers just 48 hours’ notice of the closure in a whole new light.

In a blog post titled “Finder Earn is sunset,” according to the company it no longer “served” customers amid rising interest rates.

“Simply put, we have determined that Earn no longer serves our members as it did in a low-fee environment,” the company said.

Last week, the company announced that co-founder Fred Schebesta, a cryptocurrency advocate, is stepping down from his role as co-CEO and taking a back seat as the colorful public face of the company.

It now appears that Finder already knew that ASIC had serious concerns about the product.

In a press release announcing the legal action today, ASIC said that after notifying Finder Wallet of its concerns, the company shut down Finder Earn on Nov. 24.

ASIC alleges that Finder Earn was essentially a bond loan, as customers deposited funds with Finder Wallet on the understanding that their funds would eventually be repaid, along with a fee for allowing Finder Wallet to use their capital.

Users deposited Australian dollars into their accounts, which were then converted into an Australian dollar-denominated stablecoin called TAUD and assigned to Finder Wallet to use for its own working capital. Finder Wallet paid customers (in Australian dollars) an annual compounded return of 4.01% or, in some circumstances, 6.01%, in return for Finder Wallet using their funds.

ASIC also alleges that Finder Wallet needed an Australian financial services license to offer Finder Earn because it was advising on financial products or trading a financial product. ASIC alleges that offering Finder Earn without a license exposed consumers to potential harm, including the possibility that they were presented with a product that was not appropriate for them.

ASIC Vice Chair Sarah Court said that because Finder Earn appeared to be a financial product, Finder Wallet was required to comply with disclosure and DDO obligations to protect consumers.

“Issuers of financial products such as bonds must issue appropriate risk disclosure documents and develop appropriate target market provisions to ensure that consumers are not sold inappropriate products. We allege that Finder Wallet failed to do this, potentially putting their customers at risk,” she said.

“This is ASIC’s third recent action against a company offering a crypto-asset-related product that we consider to be a financial product. Our message to the industry is clear: just because an offering involves a crypto-asset-related product does not guarantee that it will fall outside the current regulatory regime.”

ASIC is seeking explanations and fines and a date for the first hearing on case management has yet to be scheduled.

In response to the legal action, a Finder spokesperson said: “We do not share ASIC’s view that Finder Earn can be considered a bond. Since Finder Earn launched in November 2021, we have been proactively engaging with ASIC and fully cooperating with all ASIC requests for information.”