Pre-3 November 2021
294 The Trade Representation as it appeared prior to amendment was false, misleading or deceptive, and likely to mislead and deceive, because, at all times prior to 3 November 2021, there were no independent exchanges available via which Qoin could be exchanged for either fiat currency or other crypto-assets with the consequence that the Trade Representation was likely to lead an ordinary or reasonable member of the relevant class into error, being the formation of an incorrect belief that there were such independent exchanges.
295 If, contrary to my findings, this version of the Trade Representation was a representation as to a future matter, the question to then be asked is - did BPS have reasonable grounds for making such a representation?
296 Given evidence has been adduced to discharge the evidentiary onus under s 12BB(2) of the ASIC Act, the onus lies with ASIC to show that BPS did not have reasonable grounds for making the representation alleged.
297 At all relevant times, Mr Wiese was the person within BPS responsible for publishing the Trade Statement (both in its original form and as amended from 3 November 2021) in the White Paper and on the Qoin Website. Indeed, it is common ground that it is Mr Wiese's state of mind at the material times which is most relevant. However, Mr Wiese was not the only individual at BPS involved in taking steps to list Qoin on independent exchanges throughout the relevant period. That work was also being undertaken by, primarily, Mr Wiehan Venter, who was largely responsible for developing the technology for the Qoin Wallet and reported to Mr Wiese. Mr Pathak was also involved.
298 BPS submits that, from an early stage in the development of the Qoin Project, both Mr Wiese and Mr Pathak were aware that, at the time, thousands of different crypto tokens had been listed on hundreds of different exchanges globally, such that the idea of listing on an independent exchange appeared to be a relatively common and natural goal for crypto projects. BPS submits that the idea of listing Qoin, too, on independent exchanges was "nothing new or unusual". It submits that Mr Wiese and Mr Pathak also agreed that, given its potential benefits in increasing the attractiveness of the Qoin Project more generally, listing on independent exchanges should be a priority, and that this was reflected in the instructions given to Mr Venter in mid-2019. BPS then identifies the steps taken by Mr Wiese and others to achieve the listing of Qoin.
299 However, aspiring for a result, however conventional the aspiration, and then taking steps to achieve that result does not mean, without more, that the holder of the aspiration has reasonable grounds for a belief that the result will be achieved. This is especially as, before he started working on the Qoin Project in 2019, Mr Wiese had no prior experience working with digital currency exchanges and had never previously attempted to list a new digital currency on a digital currency exchange. Whether there were reasonable grounds requires a close examination of the evidence.
300 In his affidavit, Mr Wiese outlined the grounds that he said he relied upon in representing that purchasers or holders of Qoin would, within a reasonable timeframe in the future, be able to exchange Qoin for fiat currency or other crypto-assets via independent exchanges. Those grounds comprised:
(1) discussions that Mr Wiese had with representatives of exchanges at a Blockchain Conference which he attended in 2019;
(2) discussions that Mr Wiese had in the second half of 2019 with a representative of an exchange known as "MetaMorph";
(3) communications that Mr Wiese exchanged in May 2020 with representatives of the "National Currency Exchange Group"; and
(4) investigations that Mr Wiese undertook with Mr Venter and Mr Pathak, and later asked Mr Venter to continue to undertake, in relation to listing on exchanges, and Mr Venter's reports to Mr Wiese about discussions with exchange operators.
301 As to the first ground, Mr Wiese gave evidence that, at this conference, he was "informed there by at least two representatives of exchanges that they would be prepared to list our new cryptocurrency subject to meeting their minimum criteria". In cross-examination, Mr Wiese gave evidence that, by the time he attended this conference in Malta, he was aware that each digital exchange had its own minimum criteria that needed to be met in order for a cryptocurrency to be listed on that exchange. Mr Wiese also gave evidence that, at the time he attended this conference, BPS had not yet decided upon the technological design or financial model for the Qoin Project. Mr Wiese accepted that at the time he attended the conference in Malta, he did not know if BPS's then Qoin would be able to meet the minimum criteria for listing on any of the exchanges that he spoke with at that conference.
302 As to the second ground, in mid-2019, Mr Wiese had a discussion with a representative of MetaMorph about the possibility of listing Qoin on the MetaMorph exchange. Those initial discussions indicated that, subject to certain technological issues being resolved, it might be possible for Qoin to be listed on MetaMorph. After those initial discussions, Mr Wiese delegated the task of pursuing a possible listing on MetaMorph to Mr Venter. By late August 2019, Mr Venter's recommendation to Mr Wiese was that BPS pursue a different exchange - the Kyber Network - as an option for listing Qoin. Thereafter, neither Mr Venter nor Mr Wiese progressed any discussions with representatives of MetaMorph about a potential listing of Qoin.
303 As to the third ground, Mr Wiese gave evidence concerning two email communications in mid-2020 with an exchange known as the "National Currency Exchange". These two emails record that, in late July and early August 2020, a representative of the National Currency Exchange, Mr Tommy Shin, was looking to open up discussions with Mr Wiese about the possibility of listing Qoin on his "crypto to fiat" exchange. In cross-examination, Mr Wiese confirmed that BPS did not pursue a listing on the National Currency Exchange.
304 As to the fourth ground, Mr Wiese gave evidence under cross-examination that after he returned from the Blockchain Conference in Malta in May 2019, he and Mr Pathak discussed listing requirements. Mr Wiese and Mr Pathak began investigating listing requirements further in July 2019. From about August or September 2019, Mr Wiese made Mr Venter responsible for researching and analysing the listing criteria for different digital exchanges, although Mr Wiese and Mr Pathak also participated in that work until November 2019. Mr Wiese said that he asked Mr Venter to undertake this work because, although Mr Wiese was aware that each digital exchange had its own listing requirements, Mr Wiese did not know what each of those listing requirements were. Overall, Mr Wiese's evidence was that, from about August or September 2019, Mr Venter became the person within BPS responsible for researching and attempting to identify options for listing Qoin on an exchange.
305 Mr Wiese did not give any detailed evidence about the reports that he received from Mr Venter, other than stating that, since January 2020, Mr Venter reported to him that he had had "numerous discussions with exchange operators as well as onramp and offramp providers".
306 Evidence was given by Mr Venter as follows:
(1) in June or July 2019, he had discussions with Mr Thomas Miller who he described as being a representative of a digital currency exchange known as "MetaMorph".
(2) early in his discussions with Mr Miller, it became clear to Mr Venter that the technological platform that BPS was, at that stage, planning on using for its crypto-asset was not compatible with the technology on which the MetaMorph exchange operated. Mr Venter raised this concern with Mr Miller during the June/July 2019 meeting and Mr Miller told him that "he was prepared to list" the digital currency then being developed by BPS on MetaMorph "if" BPS could make its digital currency capable of interfacing with MetaMorph's technology.
(3) he had further discussions with Mr Miller in the second half of 2019. During those discussions, in response to Mr Miller's follow-up enquiries about the possibility of listing Qoin on MetaMorph, Mr Miller was told that BPS "still needed to sort out the technology". By late August 2019, Mr Venter submitted his first formal recommendation to Mr Wiese in relation to the options for listing Qoin. Mr Venter's recommendation was that BPS pursue a possible listing of Qoin on an exchange operated by the Kyber Network (i.e. not MetaMorph).
(4) in late August 2019, he "reached out" to the Kyber Network, and to another exchange known as "Wyre", to "start a discussion as to whether they would be the right exchange for Bartercard Group". By September 2019, Mr Venter had determined that it would not be possible to list Qoin on either the Kyber Network or Wyre. At around the same time, Mr Venter "considered" an exchange known as "Airswap". There is no evidence that Mr Venter made any enquiries with Airswap about the possibility of listing Qoin on the Airswap exchange.
(5) from about January 2020, Mr Venter experienced delays in progressing his investigations into options for listing Qoin. Mr Venter said that one of the reasons why this work was delayed was that, in 2020, Mr Miller left MetaMorph. Thereafter, MetaMorph was not one of the exchanges which Mr Venter continued to investigate in relation to the possible listing of Qoin.
(6) by May 2021, Mr Venter had not yet identified any independent exchange suitable for listing Qoin. On 11 May 2021, Mr Venter sent Mr Wiese and Mr Atkinson an online "guide" that he had then recently come across for listing crypto-assets on an exchange known as "Coinbase". Mr Venter's evidence was that this document was the first "concrete published guide" that he had found for listing on a digital exchange.
(7) after locating this guide, between September and November 2021, Mr Venter pursued enquiries in relation to possible listings with two further exchanges: "CoinsPaid", and "Transak". Mr Venter also had further discussions with Wyre. As to these:
(a) BPS did not pursue a listing on CoinsPaid because of both the cost of doing so, and issues that BPS had identified with the reputation and reliability of CoinsPaid.
(b) in relation to Transak and Wyre, BPS was unable to proceed with listing Qoin on those platforms because they each required Qoin to first be listed on a public directory known as "CoinMarketCap". Mr Venter's evidence was that, at that time, in order to be listed on CoinMarketCap, Qoin would first have to be listed on at least two other digital currency exchanges.
(8) on 7 October 2021, Mr Venter sent emails to an organisation called "AscendEX" seeking information about an exchange operated by AscendEX called the "Whitelabel exchange". There is no evidence that those inquiries progressed beyond Mr Venter's initial requests for information.
(9) on 23 November 2021, Mr Venter became aware that Qoin had been listed on Cryptochange (which is an independent exchange). In cross-examination, Mr Venter clarified that this listing of Qoin on Cryptochange was not brought about as a result of any steps that Mr Venter took; and Mr Venter was not aware that Qoin had been listed on Cryptochange until he received an email to that effect from Mr Wiese on 23 November 2021. Similarly, during cross-examination, Mr Wiese gave evidence that he had not made any attempt to list Qoin on Cryptochange before it was listed in late November 2021.
307 In summary, by early November 2021, each of the inquiries that Mr Wiese or Mr Venter had made to list Qoin on an independent exchange had resulted in the identification of various technical and commercial barriers to achieving such a listing, with nothing to indicate that any view held that such barriers could be overcome and a listing achieved was one which was based on reasonable grounds. This conclusion is supported by the fact that at no point did their inquiries progress to any substantive steps being taken to list Qoin on an independent exchange.
308 In these circumstances, at no time prior to 3 November 2021 did BPS have reasonable grounds to make the Trade Representation.
309 It follows that, if the Trade Representation as it appeared prior to 3 November 2021 was a representation as to a future matter, it was misleading.