An ASX shareholder plans to seek Federal Court approval to bring legal action against former directors and officers over the failed blockchain-based CHESS replacement project, adding another layer of scrutiny to one of Australia's biggest blockchain setbacks.
The failed blockchain overhaul of Australia's securities settlement system is facing renewed scrutiny after an ASX shareholder announced plans to seek court approval to take legal action against former Australian Securities Exchange executives and directors.
ASX said on Aug. 12 that Rosherville Pty Ltd had notified the exchange of its intention to apply to the Federal Court for permission to begin a statutory derivative action under Australia's Corporations Act.
If the court grants permission, Rosherville would pursue the case on behalf of ASX.
The proposed action relates to alleged breaches of duty connected to the exchange's unsuccessful blockchain-based replacement for its Clearing House Electronic Subregister System, or CHESS.
ASX said there are no allegations against the exchange itself in the proposed shareholder action.
ASX Shareholder Seeks Court Approval
Rosherville's proposed case cannot proceed automatically.
Under sections 236 and 237 of Australia's Corporations Act, a shareholder seeking to bring a derivative action on behalf of a company generally needs permission from the court.
The Federal Court will therefore need to determine whether the proposed proceedings can move forward.
ASX has not publicly identified the former directors or officers targeted by the proposed action. The exchange also has not disclosed the specific alleged breaches or the remedies Rosherville intends to seek.
That means the allegations remain untested and should not be treated as established findings.
ASX's official notice provides details of the proposed statutory derivative action. ASX official announcement
How ASX's Blockchain CHESS Project Failed
ASX began working on a replacement for CHESS in 2016.
The existing system handles important functions related to Australia's securities market, including clearing and settlement.
ASX selected blockchain technology developed with New York-based Digital Asset as the foundation for the replacement system.
The project initially attracted significant attention because it was expected to demonstrate how distributed ledger technology could be deployed at the heart of a major financial market infrastructure.
The plan ultimately failed to reach production.
In November 2022, ASX paused the project after an independent review by Accenture identified major issues with the proposed system's design and its ability to satisfy the exchange's requirements.
ASX subsequently abandoned the blockchain approach for the CHESS replacement and began considering alternative technology.
ASIC Took Action Against ASX
The failed project also triggered regulatory action.
The Australian Securities and Investments Commission (ASIC) launched legal proceedings against ASX in August 2024.
The regulator alleged that ASX did not have a reasonable basis for telling the market in February 2022 that the CHESS replacement project was progressing well and remained on track for an April 2023 launch.
ASIC argued that the statements provided investors with a misleading impression about the project's condition.
The regulator described the episode as a collective failure involving ASX's board and senior management.
ASX Admits Misleading Conduct
The regulatory case reached a major development in June 2026 when ASX admitted that it had engaged in misleading conduct related to the CHESS replacement project.
ASIC subsequently announced that the Federal Court had ordered ASX to pay a $14.4 million penalty and $2.1 million toward ASIC's legal costs.
The court order brought the regulator's case against ASX to an end.
ASIC's official announcement on the court penalty
ASIC's earlier announcement regarding ASX's admission is also available through the regulator's official website. ASIC on ASX's misleading conduct
The regulatory findings add significant context to the shareholder's proposed action against former ASX officials.
However, the shareholder case would involve separate legal questions concerning the conduct and duties of individual former directors or officers.
Why the Failed Project Matters for Blockchain
The CHESS replacement has become an important case study for blockchain adoption in traditional financial infrastructure.
Blockchain technology has been promoted as a way to improve settlement, transparency and data sharing across financial markets.
But the ASX experience demonstrated that replacing a mature financial-market system with distributed ledger technology can involve substantial technical, operational and governance challenges.
The failure does not necessarily mean blockchain technology cannot be used in securities markets.
Instead, it highlights the importance of technical design, testing, governance, risk management and transparent communication when blockchain is deployed in critical financial infrastructure.
Blockchain Projects Face Greater Governance Scrutiny
The ASX case also comes as regulators and financial institutions continue examining how blockchain and distributed ledger technology can be integrated into traditional markets.
Projects involving tokenized securities, stablecoins and blockchain-based settlement systems are increasingly being developed by banks, exchanges and financial institutions.
The experience of ASX provides a reminder that technological innovation does not remove the governance responsibilities of companies operating critical market infrastructure.
Executives and boards must still ensure that public statements about major technology projects accurately reflect their development status and associated risks.
Shareholder Action Could Test Director Accountability
If Rosherville receives permission from the Federal Court, the proposed derivative action could create another legal avenue for examining decisions made during the CHESS replacement project.
A derivative action is different from the regulatory proceedings already brought by ASIC against ASX.
The regulator's case focused on ASX's conduct and statements to the market.
The proposed shareholder action could instead examine whether former directors or officers breached duties owed to the company.
The court has not yet determined whether the proposed proceedings can proceed.
A Major Blockchain Failure With Lasting Consequences
ASX's blockchain-based CHESS replacement began with ambitious plans to modernize Australia's securities settlement infrastructure.
After years of development, repeated delays and a major independent review, the exchange abandoned the blockchain approach.
The project subsequently became the subject of regulatory enforcement, a multimillion-dollar court penalty and now a proposed shareholder action against former officials.
For the broader blockchain industry, the case offers an important lesson: large-scale blockchain adoption requires more than promising technology. It also requires rigorous testing, realistic timelines, strong governance and accurate communication with investors.
The next significant development will be whether the Federal Court allows Rosherville to proceed with its proposed action.
If approved, the case could bring renewed attention to the decisions made during one of Australia's most closely watched blockchain projects.
