Australia’s Federal Court has ordered the winding up of NGS Group Limited, NGS Crypto Pty Ltd, and NGS Digital Pty Ltd, after finding that the companies operated a financial services business without holding an Australian Financial Services (AFS) licence.
The ruling follows action by the Australian Securities and Investments Commission (ASIC), which argued that the blockchain mining companies breached the Corporations Act by operating and promoting an unregistered managed investment scheme. The Court has permanently restrained the NGS entities from carrying on a financial services business and ordered that liquidators be appointed.
Court Finds Serious Breaches of the Corporations Act
In its decision, the Federal Court found that NGS Group, NGS Crypto, and NGS Digital operated and promoted an unregistered managed investment scheme in “blatant contravention” of the Corporations Act.
The Court held that the companies failed to comply with fundamental regulatory requirements, including holding an AFS licence, and that this failure caused harm to investors.
Her Honour Acting Chief Justice Collier stated that there was a “wholly justifiable lack of confidence” in the conduct and management of NGS Group, which ultimately justified the winding up of the companies.
Over $59 Million Invested by More Than 450 Australians
The Court heard that more than 450 Australian investors placed approximately $59 million with NGS Group over a six-year period.
Many investors were encouraged by NGS Crypto to establish self-managed superannuation funds (SMSFs) in order to invest their retirement savings into the blockchain mining products promoted by the NGS companies.
ASIC raised concerns that a significant number of investors had placed their retirement funds at risk through these arrangements, heightening the seriousness of the regulatory breaches.
NGS Crypto Operated at the Expense of Investors
In relation to NGS Crypto, the Court found that the company carried on a business in contravention of the Corporations Act at the expense of hundreds of investors.
Acting Chief Justice Collier noted that after ASIC raised concerns about NGS Crypto’s operations, the company’s controller failed to address the “fatal flaws” in its business model.
In her ruling, the judge stated:
“After becoming aware of ASIC’s concerns regarding its operations, the controller of NGS Crypto did not rectify the fatal flaws in its operations. In those circumstances, I have no confidence in the conduct and management of NGS Crypto in respect of its affairs.”
Receivers Appointed to Protect Digital Assets
Earlier in the proceedings, on 10 April 2024, the Federal Court appointed Anthony Connelly, Katherine Sozou, and William James Harris of McGrathNicol as receivers over the digital currency assets of the NGS companies.
The receivers were also appointed over the assets of the companies’ directors, Brett Mendham, Mark Ten Caten, and Ryan Brown.
ASIC sought these orders due to concerns that investors’ digital assets were at risk of dissipation, and that appointing receivers was the most effective way to protect those assets while investigations continued.
The Court also made orders restraining Mr Mendham from travelling outside Australia, reflecting concerns about asset preservation and regulatory enforcement.
Winding Up Seen as Best Outcome for Investors
ASIC applied for winding up orders against NGS Group, NGS Crypto, and the unregistered managed investment scheme, arguing that liquidation was the best way to achieve an orderly resolution of the companies’ affairs.
ASIC submitted that appointing liquidators would help maximise the recovery and distribution of any available assets, including those held by the court-appointed receivers.
The Court agreed with this position, stating that liquidation offered investors the best chance of recovering at least some of their funds.
In relation to the scheme itself, the Court noted:
“The scheme’s members have the best chance of recovering at least some of their contributed funds through a liquidation process.”
Broader Implications for Crypto and Investment Firms
The Federal Court’s decision sends a strong warning to crypto, blockchain, and alternative investment providers operating in Australia.
The ruling reinforces that companies offering investment products — regardless of whether they involve digital assets — must comply with Australian financial services laws, including licensing, disclosure, and registration requirements.
ASIC has repeatedly stated that crypto-related businesses are not exempt from regulation, and this case highlights the regulator’s willingness to pursue enforcement action where investors are placed at risk.
What Happens Next
Liquidators will now take control of NGS Group, NGS Crypto, and the unregistered managed investment scheme. Their role will include:
- Investigating the companies’ financial affairs
- Identifying and securing remaining assets
- Coordinating with the receivers
- Distributing recoverable funds to investors where possible
While the outcome for investors remains uncertain, the Court’s orders aim to provide a structured pathway for recovery following years of regulatory breaches.
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