The Australian Securities and Investments Commission (ASIC) has sued the country’s leading stock exchange in Federal Court, alleging it made “misleading and deceptive” statements over its now-abandoned project to replace its aging systems with Blockchain technology. 

ASIC said on Aug. 14 that the Australian Securities Exchange’s (ASX’s) statements that the replacement project for its Clearing House Electronic Subregister System (CHESS) trading platform was “on track for go-live” in April 2023 and was “progressing well” were misleading.

The regulator claimed the project “was not tracking to plan” at the time the statements were made in early February 2022, and the ASX had no “reasonable basis” to imply the project would be ready by that date.

“We allege that the true state of affairs as at 10 February 2022 was that the project was not ‘progressing well,’ contrary to ASX’s announcement,” said ASIC Chair Joe Longo. “We believe this was a collective failure by the ASX Board and senior executives at the time.”

ASIC said it has not yet determined the penalty it will seek.

Source: ASIC

When asked for comment, ASX pointed Cointelegraph to a statement by ASX Managing Director and CEO Helen Lofthouse, who said it recognizes “the significance and serious nature of these proceedings.”

“We cooperated fully with ASIC’s investigation and are now carefully reviewing and considering the allegations,” Lofthouse added.

ASX wanted to replace CHESS with blockchain tech

In early 2016, ASX made the decision to replace CHESS — the computer system to manage the settlement of share transactions and record shareholdings — first introduced in the mid-1990s. 

Nearly two years later, it settled on a distributed ledger technology-based ( DLT ) system.

In November 2022 — after five years of work, multiple delays and blowing through $170 million (255 million Australian dollars) — ASX said it “paused” activity on the project after consulting firm Accenture found “significant challenges with the solution design and its ability to meet ASX’s requirements.”

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It later abandoned its blockchain plans to explore more conventional options.

ASIC’s Longo said the replacement project “must be managed effectively and transparently.”

“Failure to do so can lead to a lack of confidence in Australia as a market to attract investment,” he added.

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