• Australia's securities regulator has sued the nation's largest exchange, ASX, for making misleading statement about its now-cancelled blockchain project.

• ASX’s statements were "deceptive" and "this was a collective failure by the ASX Board and senior executives," said ASIC.

Australia's Securities and Investment Commission (ASIC) has sued the country's largest market operator, ASX Limited, for allegedly making misleading statements about how its blockchain project to replace its aged Clearing House Electronic Subregister System (CHESS) was progressing, before revealing that it had cancelled the project, the regulator announced on Wednesday.

In Nov. 2022, ASX cancelled its planned blockchain system for settling trade after Accenture identified "significant challenges" with its design. The decision saw it write-down about A$250 million ($168 million) after several delays. After years of tests, ASX had announced in 2017 that by Q1 2020 it would migrate one of its core services to a blockchain-based system.

ASIC sued on Tuesday and has not yet determined what penalty it will be seeking, but the Australian Financial Review (AFR) reported that ASX faces a maximum penalty of more than $500 million Australian dollars. ($330 million).

“We recognize the significance and serious nature of these proceedings. We cooperated fully with ASIC’s investigation and are now carefully reviewing and considering the allegations,” ASX chief executive Helen Lofthouse said in a statement.

Calls for ASX chairman Damian Roche to resign have emerged.

ASIC alleged that "ASX announcements on 10 February 2022 that the project remained 'on-track for go-live' in April 2023 and was 'progressing well' were misleading."

These representations were "deceptive" because at the time of the announcements, the project was not on track to the plan.

"ASX’s statements go to the heart of trust in the integrity of our markets. We believe this was a collective failure by the ASX Board and senior executives at the time," said ASIC Chair Joe Longo.

Longo said the project's "critical importance was all the more reason ASX needed to ensure it told the Australian public the truth about how the project was tracking and whether it would be completed on time."

Read More: Australian Securities Exchange Cancels Blockchain-Based Clearing System at $168M Cost