ASIC claimed that ASX made misleading statements about the progress of the blockchain project it launched to replace the aging Clearing House Electronic Subregister System (CHESS) system. The information provided in these statements that the project is progressing successfully and will be completed on time is described as misleading by ASIC.

ASIC has not yet decided what penalty it will seek in relation to the litigation process; However, according to the Australian Financial Review (AFR) news, it is stated that the maximum penalty that ASX may face may exceed 500 million Australian dollars ($330 million).

The ASX announced in November 2022 that the project was canceled after Accenture identified “significant challenges” in the design of the blockchain system. This decision caused the ASX to lose approximately 250 million Australian dollars ($168 million) after many delays and problems.

In 2017, when the ASX announced the project, it stated that it would transition one of its main services to a blockchain-based system in the first quarter of 2020. However, after years of testing, the project was not completed and did not proceed as ASX planned.

Following the lawsuit, the ASX did not immediately issue a statement.

“We recognize the importance and seriousness of this case. We have fully cooperated with ASIC’s investigation and are now carefully reviewing and considering the allegations,” he said in a statement through chief executive Helen Lofthouse.

This statement shows how concerned the ASX is about the outcome of the case and that it is conducting a detailed review of ASIC’s findings.

Additionally, calls have begun to be made for the resignation of ASX chairman Damian Roche. Debates continue as to whether Roche is responsible for the problems experienced during his time in office. This has brought potential changes to the ASX’s management structure to the agenda.

ASIC stated that ASX’s statements made on 10 February 2022 that the project was “ready to become operational” in April 2023 and was “progressing well” were misleading.

According to ASIC, these statements were “deceptive” because the project was not progressing as planned at the time. This situation is considered as a problem that damages the market confidence of the ASX and the confidence of investors.

ASIC Chairman Joe Longo said: “ASX’s statements strike at the heart of trust in the integrity of our markets. We believe this was a collective failure by the ASX Board and senior executives at the time.”

Longo emphasized that the “critical importance of the project further heightens the need for the ASX to provide accurate information to the Australian public about how the project is progressing and whether it will be completed on time.”

This case could spark a broader discussion about the governance and reporting processes of large-scale blockchain projects, as well as issues with governance of the ASX. Additionally, it once again reveals the importance of timely and accurate reporting of such projects.