Corporate regulator the Australian Securities and Investments Commission (ASIC) has prevented Sydney firm Holon Global Investments from offering three of its cryptocurrency funds to retail investors for three weeks over concerns they are not suitable for the retail market, with the product disclosure statements indicating that the funds may become worthless.
The 21-day interim stop orders prevent Holon from offering or distributing three funds, including Bitcoin, Ethereum and Filecoin, to retail investors due to non-compliant target market determinations (TMDs). If ASIC’s concerns are not allayed, final stop orders will be placed on the funds.
The funds are the Holon Bitcoin Fund, Holon Ethereum Fund and Holon Filecoin Fund.
Holon has disclosed the risk that assets in the funds could suffer a total loss in value.
Bitcoin and ether are down about 60% in 2022, with the former currently bouncing around $19,000. Ether is now down nearly 30% since July and now sits around US$1,300.
The Holon Bitcoin Fund gained 21.6% in its first full month of operations in July, when Bitcoin closed the month at US$23,336. In August, the fund fell -14.7% and is now down -2.6% since inception. The Ether fund, which launched at the same time, lost -6.4% in August but continues to rise 45.7% after a 59.6% gain in July. The filecoin fund lost -2.7% in August and ended up 0.3% in total.
But it is the Holon Photon Fund, which is not part of the ASIC stop order, that has been hit hardest in the past 12 months after investing in global tech companies such as Amazon Alphabet, Alibaba, Meta, Tencent and Tesla. It has lost 32% of its value in the past 12 months and is now up 3.7% since its launch in July 2019.
ASIC said in a statement that it had issued the interim orders against the crypto financier “to protect retail investors from potential investments in funds that may not be suitable for their financial objectives, situation or needs,” adding that they do not consider the funds suitable. for the broad target market defined in the TMDs.
“Each of the funds is invested in an individual crypto asset – bitcoin, ether and Filecoin,” said ASIC.
“Crypto-assets are highly volatile and complex, making concentrated investments in individual crypto-assets highly risky and speculative. Investors are likely to experience significant price volatility and deep negative returns during periods of asset price decline.”
Launched in 2019 by actuary Heath Behncke, the Web 3.0-focused digital asset manager was reportedly looking to raise $70 million in a Series B this year, before trimming his sails and chasing $10 million with the founder of Filecoin, Protocol Labs, which reportedly tipped about half that number.