Crypto Retirement Scheme Collapses, Leaving Investors in the Lurch
During the festive season, while many were celebrating, hundreds of investors faced a grim reality. An Australian court ordered the shutdown of NGS Crypto, a company that promised a secure crypto-based retirement plan. The court's decision came after liquidators found only a small fraction of the estimated $40 million invested by the public.
Promises and Red Flags
NGS Crypto had been selling "digital mining packages," promising fixed annual returns of up to 16% and guaranteed principal returns. These claims immediately raised red flags with Australia's corporate regulator. The court found that the company was operating without the necessary financial services license, violating securities and consumer protection laws.
Court Order and Investor Impact
Justice Berna Collier ordered the company to cease operations, citing significant risks to investors and repeated violations of corporate regulations. Over 450 investors had poured money into NGS Crypto and related entities over six years. Many were persuaded to transfer their retirement savings into the scheme using self-managed retirement accounts, which gave the operation an air of legitimacy.
The company's marketing materials highlighted predictable income, capital protection, and blockchain expertise, appealing particularly to older investors and retirees. However, the court-appointed liquidators from McGrathNicol have only identified $4.4 million in cryptocurrency, a mere fraction of what investors believed was invested.
Challenges in Fund Recovery
The liquidators warned that recovering the funds is challenging due to crypto price volatility and long-term staking arrangements that may not unlock until 2037. Additionally, tracing ownership is difficult because investor funds were pooled and moved across multiple wallets.
Regulatory Action and Investigations
Regulators obtained freezing orders to prevent assets from being moved, targeting the companies and their directors: Ryan Brown, Brett Mendham, and Mark Ten Caten. Authorities seized Mendham’s passport, and Ten Caten is believed to be outside Australia, while Brown was last known to be based in Brisbane.
The investigation was triggered by concerns that investor money was not being handled as represented. Justice Collier emphasized that the lack of licensing, combined with the scale of funds raised and the nature of the promises made, justified winding up the business to protect the public.
