ASX Accused of Trying to 'Crush' Rival Blockchain Trading System

The CEO of fintech firm iSignthis has accused the Australian Securities Exchange (ASX) of abusing its market-leader position by trying to delay the launch of ClearPay, a blockchain-based trading system on the rival National Stock Exchange of Australia (NSX).

A joint venture between iSignthis and the NSX, ClearPay uses distributed ledger technology (DLT) to facilitate same-day settlements and up-to-date accounting between trading participants, the share registry, and the exchange. Although it was only publicly unveiled in February, the CEO of both iSignthis and NSX, John Karantzis, said the news was leaked beforehand and claimed the news led to ASX suspending trading in ISX shares on Oct. 2.

Karantzis told CoinDesk the ASX has held a "public inquisition" into ClearPay and how it would compete with its settlement service, Austraclear, as well as its own in-the-works DLT-based trading system.

"To be perfectly honest, [the ASX is] doing a pretty good job trying to crush us at the moment," he said.

ASX has been working on a DLT-based replacement for its ageing clearing system for nearly five years. Although it had originally been scheduled for April 2021, the exchange said in late March it would delay the launch date over the uncertainty caused by the coronavirus. At the time, Karantzis said ClearPay was on track to launch sometime in early 2021.

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For its part, ASX said it suspended iSignthis shares – which had risen tenfold over the course of 2019 – so it could conduct a review after a market research group raised concerns about the company's disclosures, governance and shareholder structure.

In December 2019, iSignthis began legal proceedings against the exchange, claiming the suspension was unlawful. Then, this April, it requested an injunction that would block the ASX from releasing a 41-page report alleging iSignthis had broken the law. This was rejected by the court.

In the report, released April 30, ASX said iSignthis issued 336 million performance, or "milestone," shares to company directors and managers after it had signed four unusual contracts, outside of its core business, that were not publicly disclosed until much later.

"[I]f ASX were to reinstate ISX shares to trading now, it would allow the holders of the Milestone Shares to immediately sell them on-market and walk away with the proceeds in circumstances where there are serious questions to be answered about the legitimacy of their issue," the report concludes.

In a statement, Karantzis said: "the board of ISX rejects the ASX’s Statement of Reasons, which it considers to be a fundamentally flawed document that forms a number of erroneous conclusions based on factually incorrect information and assumptions."

Karantzis added that iSignthis was continuing their suit against ASX.

See also: State Street: 38% of Clients Will Put More Money into Digital Assets in 2020

CoinDesk approached ASX for comment on Karantzis' new allegations that the trading suspension was an attempt to delay the development of the ClearPay trading system.

A spokesperson declined to comment on the allegations, but said the exchange was only made aware that there was any sort of relationship between iSignthis and the NSX in February, more than five months after ISX shares were suspended.

EDIT (May 6, 08:15 UTC): A previous version of this article said iSignthis was dropping its case against ASX. This has since been corrected.