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The Australian Securities and Investments Commission (ASIC) has issued a stop order preventing Web3-focused investment manager Holon from offering three crypto funds to retail investors.
ASIC said it made the interim orders to protect retail investors from potentially investing in funds that “may not be suitable for their financial objectives, situation or needs.”
The order will impact the Holon Fund, the Holon Fund, and the Holon Fund, all three of which have U.S. crypto exchange Gemini acting as their custodian, providing storage and security services.
The Sydney-based firm, established in 2018, has a variety of interests outside of fund management, including providing cloud storage for Web 3.0, and it reportedly has 27 petabytes of storage in the Macquarie Cloud Services data center in Sydney, which is used to earn Filecoin currency.
The watchdog went on to allege that it is concerned that Holon “has not appropriately considered” the features and risks of the funds when determining their target markets.
ASIC said it considers that the funds are not suited to the wide target market defined in their Target Market Determinations (TMDs), which includes investors who plan to use the fund as a major component (75-100%) of their investment portfolio or as a satellite component (up to 25%).
A TMD is a document that outlines the class of consumers for which a product has been designed and is in place to assist distributors in understanding for whom the product is intended.
ASIC said it expects Holon to “consider the concerns raised” about the TMDs and take immediate steps to ensure compliance, adding that if its concerns are not addressed “in a timely manner,” final stop orders will be placed on the funds.
Crypto in Australia
It’s unclear how the latest ruling could impact Holon's future growth plans.
In March 2022, the firm looked to raise $70 million in a Series B funding round at a $342 million post-money valuation.
The deck sent to potential investors, as seen by The Australian Financial Review, said Holon wanted the money to expand its distributed cloud data storage, claiming Filecoin is to become the default data storage layer for Web 3.0.
ASIC is also keeping a closer eye on the fast-growing crypto industry.
The regulator made new hires to its crypto team in March 2022, following Ethereum’s move from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism and a wide range of company collapses in the industry.