ASX Probes Penny Stock Seeking to Raise $15 Million in Crypto ICO

The Australian Securities Exchange (ASX) has launched a probe into an IT firm behind a penny stock listed on the platform that is seeking to raise $15 million via an initial coin offering (ICO) for launching a cryptocurrency exchange.

Called Byte Power Group (BPG), the public firm issued a statement on Wednesday with answers to a total of 17 questions raised by the ASX requiring the firm to provide extensive details on its intended ICO disclosed on July 19.

Based on a release at the time, BPG aims to issue a total of 1 billion Byte Power X Loyalty Tokens (BPX Tokens) and plans to sell 25 percent of the amount to private investors at a price of US$0.06 per unit.

The goal is to raise as much as $15 million for the firm to fund the launch of the exchange where the BPX Tokens can be further traded and used to offset transaction fees. The rest 75 percent will be allocated for “pre-registered users of the exchange, company special releases, pre-opening and future marketing drive,” according to the plan.

As BPG aims to become the first publicly traded company in Australia to launch a cryptocurrency exchange with an ICO, the move sparked concerns from the ASX whether it is “in compliance with the ASX Listing Rules.”

On Aug. 1, the ASX’s compliance team sent a letter with 17 questions to BPG, requiring the firm to justify the legality of the planned operation, including the status of the ICO and any legal advice it had obtained.

In today’s written statement, BPG said it had already started selling the tokens to private investors in Australia and Singapore with a plan to further roll out in Hong Kong. It has not respond to a CoinDesk enquiry on how much it had raised so far or whether any of the rest 75 percent of the total tokens would be further sold to investors.

In both jurisdictions where it started the ICO, BPG claimed it received legal advice that the tokens are not deemed as securities. Specifically, BPG claimed the tokens are not regulated as a financial product under the Corporations Act of Australian law.

As previously reported by CoinDesk, the Australian Securities and Investments Commission (ASIC) issued a regulatory guidance for ICOs in September 2017.

The financial watchdog said at the time ICOs that offer financial products should be regulated under the Corporations Act and gave further details on how it defined such financial products, stating:

“If the value of the digital coins acquired is affected by the pooling of funds from contributors or use of those funds under the arrangement, then the ICO is likely to fall within the requirements relating to MISs [managed investment schemes]. This is often the case if what is offered through the ICO has the attributes of an investment.”

As of press time, the ASIC has not responded to CoinDesk’s request for comment on the issue.

Australian dollar image via Shutterstock

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