The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against the Australian Securities Exchange (ASX) in Federal Court, alleging that the stock exchange made “misleading and deceptive” statements regarding its now-abandoned blockchain project. The lawsuit claims that ASX’s assurances about the progress and expected go-live date of its blockchain-based system to replace the aging CHESS trading platform were not based on reality.
On August 14, ASIC stated that ASX had misled the public by declaring that the project was “on track for go-live” in April 2023 and was “progressing well.” According to the regulator, these statements, made in early February 2022, were inaccurate as the project was already facing significant challenges and was not progressing as claimed. ASIC Chair Joe Longo commented, “We allege that the true state of affairs as at 10 February 2022 was that the project was not ‘progressing well,’ contrary to ASX’s announcement. We believe this was a collective failure by the ASX Board and senior executives at the time.”
While ASIC has yet to decide on the penalties it will seek, the lawsuit underscores the seriousness of the alleged misconduct. In response, ASX Managing Director and CEO Helen Lofthouse acknowledged the gravity of the situation, stating that the company is “carefully reviewing and considering the allegations” after having cooperated fully with ASIC’s investigation.
ASX’s ambitious plan to replace its CHESS system with blockchain technology was first announced in early 2016. The distributed ledger technology-based system was intended to modernize the settlement of share transactions and record shareholdings, replacing the CHESS system that had been in use since the mid-1990s. However, after five years of work and expenditures amounting to $170 million (255 million Australian dollars), the project faced multiple delays and significant design challenges, as highlighted in a November 2022 report by consulting firm Accenture. ASX eventually “paused” the project and later decided to abandon the blockchain approach altogether in favor of more conventional solutions.
ASIC’s Longo emphasized that such large-scale projects must be managed with transparency and efficiency to maintain investor confidence in Australia’s markets. “Failure to do so can lead to a lack of confidence in Australia as a market to attract investment,” he added.