Australia’s Securities Agency Sues ASX Over Alleged Misleading Blockchain Upgrade Statements

The Australian Securities and Investments Commission (ASIC) has sued the countries largest exchange, the Australian Securities Exchange (ASX), alleging it made misleading statements regarding the progress of its Clearing House Electronic Subregister System (CHESS) replacement project.

Undermining Investors’ Confidence

In a statement, ASIC claims that the exchange’s announcements on February 10, 2022, stating that the project was “on-track for go-live” in April 2023 and “progressing well,” were misleading and deceptive.

Despite being aware of certain internal issues, the exchange made publicly implied that the project was following its announced plan and was on course to meet future milestones without any reasonable basis, the ASIC argues. 

The software upgrade was meant to replace ASX’s CHESS, which had been in use since the 1990s. This project initially billed as one of the world’s most ambitious use cases of blockchain-based technology. But the exchange had to pause it in November 2022 after Accenture reviewed and identified significant challenges in the system’s design. 

Furthermore, the regulator alleged that the exchange’s misleading information undermines financial market integrity and investor confidence. 

“ASX’s statements go to 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. The delay and subsequent pause of the project in November 2022 caused significant cost to ASX and market participants who relied on assurances as to the progress of the project and scheduled go-live date,” ASIC Chair Joe Longo said. 

It is worth noting that the ASIC is yet to determine the exact penalty it will seek in the lawsuit against ASX. 

ASX Response to the lawsuit 

In a statement, Helen Lofthouse, managing director and CEO of ASX acknowledged the seriousness of the situation saying: 

“We recognize the significance and serious nature of these proceedings. We cooperated fully with ASIC’s investigation and are now carefully reviewing and considering the allegations.”

The legal action follows a Senate inquiry earlier in 2024 that criticized ASIC for its own failure to anticipate the full scope of issues surrounding the ASX upgrade project.