Australia’s securities watchdog has sued ASX Limited, the nation’s largest market operator, for “allegedly making misleading statements” about a blockchain project that was supposed to replace the exchange’s old system that manages shareholdings and settlement.

In a statement released today, the Australian Securities and Investments Commission (ASIC) alleged that some of ASX’s February 2022 announcements about the blockchain project contained misleading information, particularly regarding claims the project was “on track for go-live” in April 2023 and was “progressing well.”

“ASIC alleges those representations were misleading and deceptive because, at the time of the announcements, the project was not tracking to plan, and ASX did not have any reasonable basis to imply the project was on track to meet future milestones,” the regulator said.

The planned project was intended to replace the Clearing House Electronic Subregister System (CHESS), but ASX paused it in November 2022 after Accenture reviewed the system’s design. According to the ASIC, Accenture identified “significant challenges,” leading ASX to pause the project and write down costs of A$250 million ($166 million).

“When the ASX falls short, it has wide-ranging consequences across the market,” ASIC Chair Joe Longo said. “Companies and market participants rely on what the ASX says about its operations to make their own decisions and investments.”

In response, ASX said today that ASIC is seeking declarations, financial penalties, an adverse publicity order and costs against ASX.

“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,” Helen Lofthouse, managing director and CEO of ASX, said in the statement.

ASX’s stock price closed down 3.67% at A$63.45 on Wednesday, with a market cap of A$12.3 billion.

ASX is expected to release its financial results for the entire year, which ended June 30, 2024, on Friday.