ASX faces potential legal action over failed CHESS blockchain project

ASX announced that a shareholder, Rosherville, plans to seek court approval to launch a statutory derivative action against certain former officers and directors of the Australian Securities Exchange. The legal action concerns the abandoned blockchain-based Clearing House Electronic Subregister System (CHESS) replacement project, which was intended to modernize Australia’s securities clearing and settlement infrastructure.

The CHESS replacement project was paused in November 2022 following an independent review that identified significant issues regarding its design and delivery. ASX subsequently abandoned the original blockchain-based approach in favor of a new replacement plan.

Following the disclosure, ASX shares fell by as much as 2.5% to A$55.68, marking the company’s largest intraday decline since July 3. ASX stated that the allegations are directed at former individuals and that there are no allegations against the exchange itself. Under the Corporations Act 2001, a statutory derivative action allows an eligible shareholder to bring legal proceedings in the company’s name when the company is unlikely to do so, generally for the company's benefit.