UPON THE UNDERTAKING OF SHIHO BROWN, GIVEN BY HER COUNSEL in relation to an unimproved real property at Lot 26, 2 Jessie Daniels Drive, Benobble in the State of Queensland (the Property), until further order or the written agreement of the Plaintiff:
(A) not to further charge, mortgage or otherwise encumber the Property beyond that which is reasonably necessary to secure finance to enable her to complete the purchase of the Property as required by the contract referred to in paragraphs 39 and 40 of the Affidavit of Ryan Todd Brown filed 22 April 2024 (the Contract);
(B) to discharge her repayment obligations to the bank or financial institution which provides the finance to enable her to complete the purchase of the Property as required by the Contract in accordance with the terms on which such finance is offered;
(C) not to sell, dispose of, or otherwise deal with the Property; and
(D) to agree to any aggrieved person (within the meaning of that term in s 1323 of the Corporations Act 2001 (Cth) enforcing any future judgment which may be obtained against the Sixth Defendant in relation to the affairs of the First to Third Defendants the subject of investigation by the Plaintiff against the Property in accordance with the rules of any Australian court in which such a judgment may be obtained.
[2]
Pursuant to s 1323(5) of the Corporations Act 2001 (Cth) and r 39.05(a) of the Federal Court Rules 2011 (Cth), the orders made ex parte on 10 April 2024 be varied to accord with Annexure A to these orders (which shall replace those orders with effect as and from the entry of these orders).
Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[3]
Annexure A
PENAL NOTICE TO:
NGS CRYPTO PTY LTD (ACN 624 825 065)
NGS DIGITAL PTY LTD (ACN 630 115 543)
NGS GROUP LTD (HK COMPANY NUMBER 1963940)
BRETT ALLAN MENDHAM MARK JAMES TEN CATEN RYAN TODD BROWN
IF YOU (BEING THE PERSON BOUND BY THESE ORDERS):
(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.
ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.
[4]
THE COURT NOTES THAT FOR THE PURPOSE OF THESE ORDERS:
Australian Member: includes any person, whether as an individual or a body corporate, based or registered in Australia, who has entered into an agreement (however described) through the Business, to invest in Blockchain Mining.
Books: includes a register, any other record of information, financial reports or financial records however compiled or recorded or stored, a document, papers, records, books of account, ledgers, journals, banking records, computer records, or other documents of any type whatsoever recording or evidencing any dealings of any of the Defendants in relation to the Business.
Blockchain Mining: means the process of verifying or validating blockchain transactions using blockchain technology to secure the network, and includes the following methods:
(a) 'Proof of Work', being a consensus mechanism in which participants on a decentralised network compete by using computational power to solve a mathematical equation on the blockchain; and
(b) 'Proof of Stake', being a consensus mechanism in which participants on a decentralised network lock up or 'stake' an amount of their cryptocurrency or crypto-tokens for the ability to validate blockchain transactions.
Business: means all activities and arrangements whereby the First or Second or Third Defendants, whether by themselves or any of them, or by their servants, agents or employees:
(a) provide recommendations or statements of opinion about superannuation products, cryptocurrency or Blockchain Mining; or
(b) elicit or obtain funds from investors for the actual or ostensible purpose of providing to investors, or arranging for investors to acquire, an interest in a financial product, including:
(i) superannuation products; and
(ii) investments in or related to cryptocurrency, including Blockchain Mining.
Digital Currency: means any legal or equitable estate or interest (whether present, future, vested or contingent) including a thing in action, in or to any digital currency, virtual currency, cryptocurrency, digital token, blockchain asset, or right or interest which is recorded or transacted with using blockchain technology, or anything similar.
Digital Currency Assets: means any and all Digital Currency held or controlled by the Defendants or any of them.
Investor Funds: means monies or Digital Currency, provided to the First or Second or Third Defendants or any of them, whether directly, or through any of the other Defendants, or any authorised agents, servants and/or representatives of a Defendant, for the actual or ostensible purpose of providing to investors, or arranging for investors to acquire, an interest in a financial product, including:
(a) superannuation products; and
(b) investments in or related to Digital Currency, including Blockchain Mining.
THE COURT ORDERS THAT:
Ex Parte/Short Service Orders
The Plaintiff has leave to file the following affidavits in support of the Plaintiff's application:
(a) Affidavits of Peter James Connor sworn 9 April 2024 and 10 April 2024;
(b) Affidavit of Alex James Lynch sworn 9 April 2024;
(c) Affidavit of Kristina Matia Hiratos sworn 9 April 2024;
(d) Affidavit of Katie Nicolas Loizou affirmed 4 April 2024;
(e) Affidavit of Kaan Finney affirmed 5 April 2024; and
(f) Affidavits of Michael Spencer affirmed 12 February 2024 and 7 March 2024. (collectively, the Affidavits).
The Plaintiff has leave to file the witness statements of Andrew Nguyen dated 3 January 2024 in support of the Plaintiff's application and the consent of the Receivers dated 8 April 2024.
The Plaintiff has leave to file its outlines of written submissions dated 9 April 2024 and 10 April 2024 (Submissions).
Service of this Originating Process is dispensed with and the prayers for relief interim relied at paragraphs 5 to 22 of the Originating Process filed 9 April 2024 in this proceeding be returnable instanter.
The time for service of the Originating Process, the Affidavits and the statements referred to in Order 2 above and the consent of the Receivers on the Defendants be abridged to 5pm on 11 April 2024.
Interim receiver and asset preservation orders
Pursuant to sections 1323(1)(h) and (3) of the Corporations Act, effective on and from 6:00am AEST on Thursday, 11 April 2024, until further order, Anthony Norman Connelly, Katherine Sozou and William James Harris of McGrath Nicol, Level 15, 175 Eagle Street, Brisbane 4000 QLD, are appointed as joint and several receivers and managers (Receivers), without security, of the Digital Currency Assets, whether within or without the State of Queensland, for the purpose of identifying and securing the Digital Currency Assets.
The Receivers have the powers set out in sections 420(2)(a), (b), (e), (f), (g), (k), (n), (p), (q), (r) and (t) of the Corporations Act and can exercise these powers with respect to the Digital Currency Assets.
The Receivers have the power to apply to the Court for directions or further orders.
After service of these orders on the Defendants, the Defendants and each of them shall immediately deliver up to the Receivers the Digital Currency Assets and all books, records and things, which relate to any Digital Currency Assets, including, but not limited to:
(a) all relevant credentials and passwords for access to any Digital Currency Asset, including but not limited to, the public and private access keys and/or addresses any hot or cold wallet held or controlled by the Defendants (or any of them) and any login details for any account held by or with any third party exchange, platform or custodian in the name of, for the benefit of or on behalf of the Defendants (or any of them);
(b) any and all authentication devices required to facilitate access, operation or control of any Digital Currency Asset;
(c) all relevant credentials and passwords for access to the authentication devices or systems, including emails, SMS or mobile apps, that facilitate access, operation or control of any Digital Currency Asset); and
(d) any hard wallet device containing or facilitating access to any Digital Currency Asset together with that device's access code.
[5]
Introduction
1 This is an application made by Mr Ryan Brown, the sixth defendant in the proceedings and the sole director of the second defendant, NGS Digital Pty Ltd (NGS Digital). By his application, he seeks to vary certain orders made by Meagher J on 10 April 2024, consequent upon an ex parte application brought by the Australian Securities and Investments Commission (ASIC): see Australian Securities and Investments Commission v NGS Crypto Pty Ltd [2024] FCA 373.
2 Although the nature of Meagher J's orders will be discussed in detail below, in substance, her Honour's orders involved the freezing of certain assets, including ones held by Mr Brown, in the form of cryptocurrency and the like. Those assets will be referred to as "crypto assets" for convenience, even though that is an inexact description. Mr Brown claims that there ought to be a variation to those orders in circumstances where he holds almost all of his money in crypto assets and uses the crypto assets to meet his day-to-day living expenses. In particular, he seeks a variation so that he might have limited access to the crypto assets to meet his family's living expenses, his legal expenses in relation to the present proceedings, and to complete a property transaction.
3 ASIC opposes any such variation to Meagher J's orders.
4 It ought to be noted that the application before the Court is interlocutory, as was the application before Meagher J. Indeed, the application before Meagher J was ex parte, and neither Mr Brown nor the other defendants had an opportunity to adduce evidence. Therefore, any findings made by her Honour were necessarily provisional, the material on which they were made is untested, and no submissions were able to be advanced as to why the orders should not have been made. Similarly, although the present application is contested, it is also an interlocutory application. Any determinations or findings of fact made are necessarily preliminary and caution must be had in relying upon any observations or conclusions reached in these reasons. Experience shows that findings of fact and matters which are thought to exist at an interlocutory stage, are often proved to be incorrect at a final hearing.
[6]
Background
5 ASIC has commenced the present proceedings against a number of defendants in relation to an alleged business, or businesses, concerning the securing of third party investors to apply their money into what is known as "blockchain mining operations". The corporate defendants, consisting of the first three defendants, apparently operate a blockchain mining business in Indonesia, albeit only the third defendant, NGS Group Ltd (NGS Group), is directly involved in that activity. The first and second defendants, NGS Crypto Pty Ltd (NGS Crypto) and NGS Digital, appear to be involved in the overall business by way of securing investors to apply their money to the alleged "mining" operations, in the hope of receiving what were advertised to be substantial returns.
6 In general terms, the first and second defendants were involved in the retailing of the opportunity to invest in the mining operations and that they did so, it appears, within the limits of Australia. That said, it is noted that other persons or entities outside of Australia seem to also have invested in the blockchain mining business. Some of the individuals behind the business have been examined by ASIC, and substantial evidence has been obtained about it and its operations. It can be observed that one of ASIC's major concerns in this matter is that those promoting the investments have suggested that substantial returns of up to 16% are available on the investments.
7 Another of ASIC's major concerns is that part of the process through which investors are induced to provide an investment is via a mechanism which is becoming all too familiar in this Court. That is, people who had their superannuation interests managed by industry funds, or some other professionally financially managed funds, have been induced to cause their funds to be rolled over into a self-managed super fund. Thereafter, the individuals concerned obtain sole control of the fund, and are then free to, and do, invest in high-risk ventures. In this case, the high risk venture is the crypto mining proposal offered by the defendants.
8 The scheme under consideration in this matter has been successful in raising a substantial amount of money in Australia. The evidence before Meagher J indicated that in the period between late November 2017 and late December 2023, some 464 Australian investors had invested funds totalling around AUD60,000,000.
9 There is no need to detail the nature and scope of ASIC's investigation into the operation of the business, but it has raised a number of legitimate concerns. First, about the veracity of the investment scheme. Secondly, about the veracity of the statements which have been used to induce individuals or others to invest in the scheme. Thirdly, that the promoters of the scheme have not held a relevant Australian Financial Services Licence, and may have been required to do so, given that they appear to have:
(a) provided financial product advice;
(b) dealt in financial products; and
(c) arranged for the acquisition of beneficial interests in self-managed super funds.
10 A further concern raised by ASIC is that, whilst investors have been induced to part with their funds on the apparent promise that they will be applied to the alleged blockchain mining activities, in fact, some of the funds are not used for those purposes, but are diverted into the operational expenses of the members of the group. Indeed, the evidence appears to show that a substantial amount of money received from one investor was paid directly into Mr Brown's personal account. Whilst that may be entirely explicable, and for present purposes there is no need to reach any final conclusion about it, ASIC holds a legitimate concern as to the manner in which investor funds are being used. ASIC is also concerned that, apart from the mining operations, the end result of those operations is converted into cryptocurrency tokens, which are used for various activities which carry higher risks than blockchain mining.
11 In furtherance of its obligation to protect consumers in the financial services industry, ASIC brought the current proceedings and, on 10 April 2024, Meagher J made a raft of interim orders. They included orders:
(a) appointing receivers and managers to the crypto assets of the defendant companies and individuals;
(b) requiring the defendants to deliver up all records, books and things which relate to the crypto assets;
(c) requiring the defendants to provide all authorisations, information and devices to allow receivers to secure the crypto assets;
(d) freezing the crypto assets of the defendants;
(e) requiring the defendants to disclose their assets; and
(f) restraining the defendants from leaving the country, to the extent they were individuals and in the country.
12 As mentioned, Mr Brown is the director of NGS Digital, and largely this application only involves him. It appears that, at the time of the hearing, the other defendants had not responded to the orders of Meagher J and the receivers are therefore not possessed of any of their assets.
13 As has also been mentioned, Meagher J's orders had the consequence that Mr Brown was unable to access any funds which might be used for his living expenses, his legal expenses or for any purpose whatsoever. Hence, he has brought this application so that he may access some of the frozen assets. Somewhat unusually, ASIC opposed allowing Mr Brown to access and use the frozen funds for any purpose whatsoever. That was despite there being no final determination of any claim which might be brought by any investor or any conclusion being reached that Mr Brown is liable in any way. The degree to which the orders have been capable of enforcement against others is yet unknown.
[7]
The form of the freezing orders
14 Turning then first to the general issue of providing allowance for living and legal expenses, it was submitted by Mr Russell, counsel for Mr Brown, that it is a not uncommon feature for orders of the type made by Meagher J to include carve outs which provide for natural defendants or even corporate entities to use money for their legal expenses: see the Court's Freezing Orders Practice Note (GPN-FRZG). For natural persons, carve outs are often made for the provision of living expenses: see Vasilaras & Co Pty Ltd v Laprese (2019) 58 VR 155, 175 [71]; Clout (Trustee) v Anscor Pty Ltd [2001] FCA 174 [19]. There were, however, none contained in the orders made in this case. There is no criticism in that, and it is explicable by the fact that her Honour did not make blanket orders in relation to all of the assets held by the defendants, including Mr Brown, but only those relating to "Digital Currency", including cryptocurrency. In the circumstances before her Honour, there was a not unrealistic expectation that Mr Brown had his own personal assets or other assets which he might use to meet his living expenses, legal expenses and other matters. Unfortunately, that expectation has now been revealed to have been incorrect. Mr Brown has organised his personal affairs, so he said, by use of cryptocurrency and crypto assets, and he meets his day-to-day living expenses and other expenses from them. Therefore, by the orders requiring him to hand those assets over to the receivers, he has been deprived of his ability to meet those obligations.
15 ASIC opposed the creation of a carve out in respect of the living expenses, legal costs and other amounts which Mr Brown sought. As the matter proceeded, that opposition, or the basis for that opposition, became more clear. Although it is not entirely without doubt, there is a central issue concerning the nature of the claim or claims which ASIC might pursue as against the defendants, including Mr Brown. It was implicit in what was said that ASIC's view is that the money or funds in the hands of the defendants is, in reality, the investors' money and, in that way, is held on trust for them.
16 Although the mechanism by which money, whether it be fiat currency or cryptocurrency, reached the defendants is a little tortured, it can be said that the transactional arrangements between the investors and the defendants, in particular NGS Group, are crystallised in a document called a "mining agreement". By it, it was generally agreed that the investor's investment would be applied to what may be called the mining operations. It appears that an investment would be made by the payment of money to NGS Group, or by the investor giving NGS Group the ability to utilise cryptocurrency or other funds held by them. The agreement itself is not a model of clarity, and it is fair to say that there will be submissions either way as to precisely the manner in which it operated. That is not unusual in circumstances similar to the present case, in the sense that such documents are often ill-drafted and require extensive debate as to their true meaning.
17 Nevertheless, on a prima facie reading, the mining agreements tend to take the form of an agreement whereby the investor advances moneys to NGS Group for the purpose of applying it to crypto mining operations and other matters. The agreement of itself expressly denies that it creates a trust or any rights in the investor as a beneficiary. On that basis, one might assume that ASIC may have some difficulty in the future in establishing that the money received was held on trust and otherwise had to be dealt with according to the trust obligations. There is no need to reach any final determination in relation to that, and it needs to be kept in mind that there are a variety of ways in which trust obligations might arise. Indeed, they may arise as a result of misrepresentations made inducing a person to hand over monies. For present purposes, it suffices to say that a significant question arises in relation to how the defendants came to hold the assets which they do.
18 Prima facie, where freezing orders are made prior to the final determination of the parties' respective rights and liabilities, it is appropriate to give consideration to the issue of the extent to which a party, who is subject to the order, should have access to the relevant assets. A blanket freezing order will deny them the ability to use funds for living expenses, legal expenses and other purposes. That is a serious imposition on a party who is subject to the orders, and the absence of a carve out can leave the party destitute and unable to defend themselves against the allegations made. It is for this reason that the exemplar orders in the Freezing Orders Practice Note (GPN-FRZG) include such carve outs.
[8]
ASIC's grounds of opposition
19 The first ground on which ASIC opposed the creation of any carve outs to allow Mr Brown access to the crypto assets was that the origins of the funds held in them were unclear, and that it was not beyond doubt that the funds belonged to Mr Brown.
20 Although that may be a valid concern, there has been no final determination or conclusions reached that Mr Brown is liable in any way. Nor could it be concluded, at the present stage of the proceedings, that the funds did not belong to Mr Brown. It would be inappropriate to wholly deny Mr Brown access to funds to meet basic expenses on the basis of unproved claims and assertions.
21 A related ground on which ASIC opposed the creation of carve outs for the identified expenses was in relation to the risk of dissipation if the Court gave Mr Brown access to his digital accounts.
22 There is, however, no real risk of dissipation in the present case. It would, of course, be inappropriate to allow Mr Brown direct access to the digital accounts or crypto assets now in the hands of the receivers. Rather, if an order were made to allow Mr Brown access to money from the crypto assets, the money should be passed through the medium of the receivers, who presently have control of the assets; the money which could be accessed would also be subject to limitations. An order for a carve out in relation to living expenses in that form is capable of preventing any risk of the assets being wrongly dissipated and minimises the chance of misuse.
23 ASIC also opposed the application on the basis that Mr Brown failed to produce certain hardware which allowed the receivers access to digital assets for a period of some ten days after being served with Meagher J's orders. That does, as was properly submitted by ASIC, give rise to a question of whether Mr Brown is trustworthy, but it does not go further and disentitle him from access to funds for living and legal expenses from funds which may well belong to him. It is up to ASIC to take what action it thinks appropriate in relation to that alleged non-compliance.
24 Although he did not appropriately surrender all the hardware required by the orders, for the purposes of the present application, that is a relatively neutral matter.
25 In those circumstances, there is no reason why Meagher J's orders ought not be varied to allow Mr Brown some access to the crypto assets. The remaining question is the extent of the variation which should be made.
[9]
The extent of the carve outs
26 The question of the quantum of the living expenses which should be allowed is bedevilled by two problems. One is that the evidence which was adduced on behalf of Mr Brown was unclear and vague. It was also inconsistent, and Mr Wilkins KC, counsel for the receivers, pointed out a number of serious inconsistencies in the evidence which were not really explicable. That said, it is possible to discern that Mr Brown suffers personal hardship from the fact that the financial facilities which he previously utilised for the purposes of funding his living expenses for himself, his wife and his family have been frozen. Whilst he may be the recipient of other income, its availability and amount is doubtful in the present circumstances. It must not be forgotten that the orders made here are interlocutory and subject to variation in the future if the need arises.
27 The second problem about the evidence concerning Mr Brown's living expenses and the like is the fact that he was not cross-examined. Although the inconsistencies were pointed out to the Court, they were not put to Mr Brown. That is not said by way of any criticism, it is merely to say that the result is a lack of clarity. Whilst Mr Brown said that he requires $10,000 a month from the crypto assets held by the receivers to fund his living expenses, the evidence also suggested that he has a salary of approximately $6,400 a month which he might derive from his employment with NGS Digital and which is paid into a personal bank account held by him. Although the present circumstances appear to suggest that NGS Digital has ceased trading, that does not mean it necessarily will not be receiving any further funds and, particularly, from other companies in what might broadly be said to be the corporate group. The digital mining operations might continue, and it may be that income will be earned through those operations which may, in fact, filter down from NGS Group to NGS Digital.
28 It was within Mr Brown's capability to adduce clear evidence about his needs and the money which he, in fact, received or was able to receive. The Court cannot be convinced that he will not receive any other funds, but it can be accepted that his ability to receive income has been greatly diminished. On the material which is presently available, and using a broad brush approach, it is appropriate to allow him access to funds to meet his living expenses, but capped in the amount of $6,000 a month. That conclusion is based on the presently available evidence and an application can be made in the future if the circumstances change or additional evidence is produced.
29 The second proposed carve out relates to Mr Brown's legal expenses. Again, that is not an inappropriate carve out from the amount of money that is presently held by the receivers. Whilst the nature of the rights to the money in the accounts is unclear, it is unfair to deprive Mr Brown of the ability to defend the action against him. Were it otherwise, it would mean that defendants in the position of Mr Brown would have to capitulate to whatever ASIC claimed, simply by reason of the absence of funds to defend an action against them.
30 The third proposed carve out is somewhat unusual for an application of this nature, and relates to certain property transactions which Mr Brown and his wife have entered into. Mr Brown's evidence was that his wife previously entered into a contract to acquire land on which it is intended to build their family home. The contract is due to settle in the near future, and on Mr Brown's evidence, Mrs Brown requires $135,000 from the crypto assets to meet the balance of the purchase price. Of course, if she fails to settle she will be in breach of the agreement, and the evidence showed that in that case she will suffer a loss. It is relevant that there was no offer from ASIC to indemnify Mr and Mrs Brown in relation to any losses that they might suffer were the contract not to be performed.
31 In those circumstances, it is also appropriate that Mr Brown have access to digital funds held by the receivers in the amount of $135,000 to allow his wife to complete the acquisition of land. The land has been or is to be purchased in the name of Mrs Brown, such that there is a risk about the dissipation of the funds by her with the consequence being that they may become unrecoverable. That was overcome by the offering of an undertaking by Mrs Brown. Despite ASIC's submissions to the contrary, it can be accepted that an adequate undertaking can be formulated and largely has been, which will protect the receivers and ASIC in relation to any amount given to Mrs Brown or allowed to be used by her to complete her contract. At the hearing, an undertaking was contained in the draft orders handed to me by Mr Russell of counsel, though it should be amended in accordance with the variation proposed by Mr Wilkins KC to the effect that Mrs Brown must undertake to maintain all mortgage payments with respect to the land which she acquires, such that the amounts secured by any mortgages does not increase.
32 A question also arose as to whether or not Mrs Brown's undertaking should extend to making the land available to meet the liabilities of persons other than Mr Brown. However, that would be too great an extension of the undertaking. If the monies which are received by Mrs Brown are subject to any claims, it is more than likely that Mr Brown will have been liable for those amounts because, in those circumstances, the money must have passed through his hands, and for that money to be recoverable, he, himself, would be liable.
33 Mr Brown also sought orders that he be entitled to access and use the funds held by the receivers for other purposes. In particular, he wished to apply $200,000 to the building of a house. He deposed that in order to raise sufficient finance in relation to the proposed construction, he would need to pay off his car loan, which is approximately $140,000. In essence, he sought a payment of a further $340,000 out of the funds held by the receivers. There are difficulties in relation to those amounts. The first is that those amounts are not presently required. As was submitted Mr Wilkins KC, under the contract for the purchase of the land which Mrs Brown has entered into, the construction of the house only needs to commence within two years after settlement, and the building of the house only needs to be completed within five years. There is no pressing need for the house to be built immediately. In those circumstances, it is inappropriate at this stage to make any variations in respect of these expenses. If the circumstances change, the parties can return to the Court to seek further variations to the orders.
34 On present calculations, the amount of money to be made available to Mr Brown from the approximately $1 million presently held by the receivers is not relatively significant. It provides protection to Mr and Mrs Brown in respect of any liabilities arising under the contract for the purchase of land and provides a small amount in relation to the family's living expenses. The funds to be made available for Mr Brown's reasonable legal expenses should not be great and if they become excessive orders can be made capping payments in that regard.
35 The method of allowing access to the funds is that Mr Brown must apply to the receivers for payment of the $6,000 a month and for the $135,000 necessary to complete the contract for the purchase of the land. In relation to obtaining funds for his legal expenses, Mr Brown should submit to the receivers his legal bills as and when they arise, and the receivers, using their professional judgement, can determine whether the amount in question is reasonable. Any dispute about any payment can be brought back to the Court.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.
[10]
SCHEDULE OF PARTIES
QUD 178 of 2024
Defendants
Fourth Defendant: BRETT ALLAN MENDHAM
Fifth Defendant: MARK JAMES TEN CATEN
Sixth Defendant: RYAN TODD BROWN
[11]
Interested Persons
Interested Person: ANTHONY NORMAN CONNELLY, KATHERINE SOZOU AND WILLIAM JAMES HARRIS AS JOINT AND SEVERAL RECEIVERS
Parties
Applicant/Plaintiff:
Australian Securities and Investments Commission
Respondent/Defendant:
NGS Crypto Pty Ltd
Legislation Cited (7)
Australian Securities and Investments Act 2001(Cth)
The Plaintiff shall, upon request of the Receivers, deliver up to the Receivers copies of all books, records and things concerning the Digital Currency Assets, which have been obtained by the Plaintiff under Part 3, Division 3 and/or Division 3A of the Australian Securities and Investments Act 2001 (Cth) including, but not limited to:
(a) all relevant credentials and passwords for access to any Digital Currency Asset, including but not limited to, the public and private access keys and/or addresses any hot or cold wallet held or controlled by the Defendants (or any of them) and any login details for any account held by or with any third party exchange, platform or custodian in the name of, for the benefit of or on behalf of any of the Defendants (or any of them);
(b) any and all authentication devices required to facilitate access, operation or control of any Digital Currency Assets;
(c) all relevant credentials and passwords for access to the authentication devices or systems, including emails, SMS or mobile apps, that facilitate access, operation or control of any Digital Currency Asset; and
(d) any hard wallet device containing or facilitating access to any Digital Currency Asset together with that device's access code.
The Plaintiff shall, upon the request of the Receivers, deliver up to the Receivers copies of the Affidavits and the statements referred to in Order 2 above.
The Receiver's costs and expenses are payable from the Digital Currency Assets.
Asset Preservation Orders
Save as required to comply with Order 9 above (for delivery up to the Receivers of the Digital Currency Assets and all books, records and things which relate to the Digital Currency Assets), and subject to Order 14 below, the Defendants, and each of them, by themselves and their servants, agents and employees, are restrained from:
(a) removing, or causing or permitting to be removed from Australia all or any of the Digital Currency Assets;
(b) selling, charging, mortgaging or otherwise dealing with, disposing of and/or diminishing the value of all or any of the Digital Currency Assets;
(c) causing or permitting to be sold, charged, mortgaged or otherwise dealt with, disposed of, or diminished in value, all or any of the Digital Currency Assets; and
(d) without limiting the terms of sub-paragraphs (a) to (c) above, withdrawing, transferring or otherwise disposing of any Digital Currency Asset available in any account with any bank, building society, cryptocurrency exchange, hot or cold crypto wallet, recorded on any blockchain or by any financial institution (in Australia and elsewhere).
Order 13 above does not prevent:
(a) any bank, building society or financial institution from exercising any right of set- off which it may have in respect of a facility afforded by it to a Defendant prior to the date of this Order;
(b) the Receivers paying to the Sixth Defendant, from proceeds of Digital Currency Assets delivered to the Receivers by the Sixth Defendant and which he asserts to be his Digital Currency Assets, the sum of $6,000 per month on account of his ordinary living expenses;
(c) the Receivers paying to the Sixth Defendant's legal representatives, from proceeds of Digital Currency Assets delivered to the Receivers by the Sixth Defendant and which he asserts to be his Digital Currency Assets, the Sixth Defendant's reasonable legal expenses in relation to this proceeding; or
(d) the Receivers from paying to the Sixth Defendant, from proceeds of Digital Currency Assets delivered to the Receivers by the Sixth Defendant and which he asserts to be his Digital Currency Assets, the sum of $135,000 to be used for the purpose of Shiho Brown completing the purchase of the land as required by the contract to which reference is made at paragraphs 39 and 40 of the Affidavit of Ryan Todd Brown filed 22 April 2024.
In relation to Order 14 above, and until further order:
(a) the Receivers are to pay (from proceeds of Digital Currency Assets delivered to the Receivers by the Sixth Defendant and which he asserts to be his Digital Currency Assets) the sum of $6,000 in Australian dollars to a bank account nominated by the Sixth Defendant forthwith upon the making of this order and on the monthly anniversary of that payment thereafter; and
(b) in relation to the Sixth Defendant's reasonable legal expenses:
(i) the Sixth Defendant's legal representatives are to deliver to the Receivers itemised bills within the meaning of s 300 of the Legal Profession Act 2007 (Qld);
(ii) the Sixth Defendant is to submit any invoices received from his legal practitioners to the Receivers within a reasonable time after receipt; and
(iii) the Receivers are to either pay those invoices within 14 days or make an application to the Court for directions as to the reasonable amount that ought to be paid on account of those liabilities.
Asset Disclosure Orders
Except to the extent that a claim of privilege against self-incrimination is made, each Defendant is to deliver to the Plaintiff and the Receivers by 4:00pm on 8 May 2024, a full and detailed affidavit sworn or affirmed by the Defendant (or, in the case of each corporate Defendant, a director thereof) stating, to the best of the Defendant's ability, and after the Defendant has taken all reasonable steps within the Defendant's power to obtain the information described in (a) to (c) below:
(a) the name and address of any bank, building society, cryptocurrency exchange, or other financial institution (in Australia and elsewhere) at which there is any account in the name of or under the control of the Defendants (or any of them), or in which the Defendants (or any of them) have any legal or equitable interest, together with the number of such account, the name of such account and the balance of that account and the login details for that account;
(b) a list of the locations (in Australia and elsewhere) of all digital currency, virtual currency, cryptocurrency, digital token, blockchain asset, or right or interest which is recorded or transacted with using blockchain technology held or controlled by the Defendants (or any of them), or in which the Defendants (or any of them) have any legal or equitable interest, or in respect of which the Defendants (or any of them) have a thing in action, together with the public or private keys for any cold or hot wallets held or controlled by the Defendants (or any of them) and the nature, type and amount of the Digital Currency held in any such wallets;
(c) a list of all escrow accounts which hold Digital Currency on behalf of the Defendants (or any of them); and
(d) the steps which the Defendant has taken to obtain the information described in (a) to (c) above.
In the event that a Defendant wishes to object that compliance with Order 16 above may tend to incriminate the Defendant, by 4:00pm on 8 May 2024 the Defendant must, in accordance with section 128A of the Evidence Act 1995 (Cth):
(a) prepare, file and serve on the Plaintiff and the Receivers an affidavit disclosing so much of the information required to be disclosed by Order 16 above to which no objection is taken;
(b) prepare an affidavit containing so much of the information required to be disclosed by Order 16 above to which objection is taken and deliver it to the Court in a sealed envelope; and
(c) prepare, file and serve on the Plaintiff and the Receivers a separate affidavit setting out the basis of the objection.
Travel Restraint Orders
Pursuant to section 1323(1)(k) of the Corporations Act that, until further order, the Fourth Defendant is prohibited from leaving Australia or attempting to leave Australia.
Pursuant to section 1323(1)(j) of the Corporations Act that, by 4:00pm AEST, on the day which is three business days from the date upon which service is effected, the Fourth Defendant is to deliver up to the Brisbane Registry of this Court all passports in his name which are in his possession, custody or control.
The documents delivered up to the Queensland Registry pursuant to Order 19 above are to be held by the Court in the first instance until further order.
Pursuant to section 23 of the Federal Court of Australia Act 1974 (Cth) that, in the first instance until further order, the Fourth Defendant may not apply for the issue of any passport or other document permitting international travel.
In the event that the Fourth Defendant cannot locate any passport or other document permitting international travel, he must promptly:
(a) give notification to the Australian Passport Office, or other relevant authorities responsible for the issue and control of Australian passports or travel documents, or, in the case of a foreign passport or travel document, the relevant authority responsible for the issue and control of such passports or travel documents, confirming that he has lost his passport or travel document; and
(b) file and serve an affidavit stating that fact and exhibiting a copy of the above notification sent.
Service of Orders on Third Parties
To the extent necessary, the Plaintiff has leave to give to:
(a) any bank, building society, cryptocurrency exchange, or other financial institution through which, to the best of the Plaintiff's belief, Digital Currency Assets are held, or controlled;
(b) any other person or entity which, to the best of the Plaintiff's belief, holds or controls Digital Currency Assets;
(c) the relevant authorities that issue and control of passports;
(d) the Australian Border Force; and
(e) the Receivers.
notice of the making of any of the foregoing interim orders by giving a copy of the minute of the orders to a person apparently in the employ of any such entity or person.
Non-Publication Orders
Pursuant to sections 37AF(1)(a) and (b) and 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth) that, in order to avoid prejudice to the proper administration of justice, the publication or disclosure of the following is prohibited until 5pm on 11 April 2024, except to enable the Plaintiff to serve the Defendants, and provide copies of the orders to the entities set out in Order 23 for the purpose of enforcing the orders:
(a) any ex-parte orders obtained by the Plaintiff;
(b) the Originating Process;
(c) the Affidavits and the statements referred to in Order 2 filed by the Plaintiff in support of the ex-parte orders;
(d) any written submissions advanced by the Plaintiff in support of the ex-parte orders; and
(e) the signed consent of the Receivers.
Non-Party Access
Any application made by a non-party pursuant to rule 2.32(4) of the Federal Court Rules 2011 (Cth) to inspect the following documents:
(a) any affidavits and statements filed by ASIC; and
(b) the Submissions,
and for which access is not otherwise permitted under rule 2.32(2) is to be considered only after notice of the application has been given to the parties and they have been given a reasonable time to respond.
General Orders
Costs are reserved.
The parties have liberty to apply on three business days' notice in writing to the parties and the Receivers.
Such further or other orders as the Court considers appropriate.