In a case management hearing on Thursday before Federal Court Justice Kylie Downes, BPS flagged its opposition to the Banton Group class action’s proposed amendments, and asked for more time to respond to the new pleading. 

Barrister for BPS, Dale Bampton, argued the crypto issuer needed more than the two weeks proposed by the class action to respond to the bid to amend, saying the “whole nature of the claim has now changed”. 

“This is an entirely new claim…it is not just a matter of saying you got this on the 6th [of April] and now you should be ready to respond,” said Bampton. 

“This should be their last chance…this is the fourth iteration of the case. The fourth attempt they have had to get this right.”

Bampton said BPS had “very, very significant wasted costs” in raising objections to the class action’s previous iterations of its case. 

“We want to get this right. We don’t want to continuously be put to the cost of writing to them and telling them what is wrong,” she said. 

Barrister Philippa Ahern for the class action argued BPS should have only two weeks to review the amended pleading to raise their issues for objection, saying a tight timetable was needed to ensure the matter could be heard at the same time as the ASIC case. 

BPS’ objections to the new pleading had to be serious to succeed because the limitations period had not yet passed, Ahern said. 

“[BPS’] submission has to be ‘this pleading is so deficient that we’re not to proceed with it’. It has to be frivolous or vexatious…it has got to be something serious,” Ahern said. 

“A fight that is going to be solved by particulars doesn’t cut it.”

Justice Downes set down the fight over the amendments for hearing on May 30, saying she did not think the pleading would be “that dramatically different” and that the issue was “starting to get a bit elongated”. 

Cryptocurrency specialist law firm Salerno Law filed the class action against the Southport-based issuer of Qoin, its two directors and its associated entities in November 2021 after holders of the token claimed they had significant difficulties selling Qoin on the Block Trade Exchange, spending it online or converting it into government-issued currency.

Banton Group took over the case from Salerno Law in November last year.

The class action alleges BPS and its related entities engaged in unconscionable conduct by failing to ensure the liquidity of the Qoin system and using the “unfair tactic” of imposing a $100 withdrawal limit on unsophisticated buyers to preserve the system’s liquidity amid an unexpected boom in user numbers. 

Qoin has an exclusive trading agreement with the BTX Exchange, a related body corporate of BPS.

The action also alleges consumers and merchants were misled or deceived by representations that the Qoin system involved a free market for the exchange of Qoin tokens on independent exchanges, with no restrictions on buying or selling tokens or exchanging them for government-issued currency. 

BPS and its related entities breached the norms of free exchange because the tokens were valued according to an algorithm developed by Qoin Association, and did not represent the free market value as between buyer and seller, a fact which was not disclosed to consumers or merchants, the lawsuit alleges.

The class action accuses the respondents of engaging in unconscionable conduct and misleading and deceptive conduct.

ASIC brought civil penalty proceedings over the Qoin system in October last year.

The regulator alleges BPS misled consumers by claiming they could exchange Qoin tokens for other crypto-assets or Australian dollars through independent exchanges and that they can be used to buy goods from an increasing number of merchants registered with the financial services firm. 

ASIC also alleges BPS misled customers by saying the Qoin facility and wallet application were regulated, registered or approved in Australia and that they were compliant with financial services laws. 

Lead applicant in the class action, Its Eco, claims it was induced to spend $25,000 on the alleged worthless currency.

Its Eco is represented by Philippa Ahern, instructed by Banton Group. Block Trade Exchange and Qoin Association are represented by John Peden KC and Dale Bampton, instructed by HWL Ebsworth. Respondent Billzy Pty Ltd is represented by Kennedys, while respondent PNI Financial Services Pty Ltd is represented by Enyo Lawyers.

The class action is Its Eco Pty Ltd v BPS Financial Limited. The ASIC case is ASIC v BPS Financial Pty Ltd.

CORRECTION: A previous version of this story incorrectly stated that BPS Financial was facing allegations of fraud. We sincerely apologise for the error.

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