The Federal Court has ordered iSignthis Ltd (iSignthis), now known as Southern Cross Payments Ltd, to pay a $10 million penalty for breaching disclosure laws.
Nickolas John Karantzis, its former managing director and chief executive officer, was also disqualified from managing corporations for six years and penalised $1 million for breaching his director's duties and failing to ensure information given to the ASX was not false or misleading.
iSignthis was a business providing remote identity verification, transactional banking, and payment processing services, which engaged in a number of contraventions of the law between 2018 and 2020. It was delisted from the ASX on 4 November 2022.
ASIC Deputy Chair Sarah Court said, 'The Court has found that iSignthis and Mr Karantzis demonstrated repeated disregard for the law through deliberate acts of non-disclosure and by providing false and misleading information to the ASX.'
'This conduct resulted in significant periods of time where both the market and investors were misinformed.
'ASIC is committed to taking enforcement action to protect market integrity and uphold appropriate standards of corporate governance.'
In his reasons, Justice McEvoy found, 'The community is entitled to expect that investors will not be misled, the market operator will be respected, and that questions asked by the market operator will be answered accurately and devoid of spin and obfuscation.'
'Mr Karantzis' tendency to try to minimise the seriousness of his conduct and in some respects to justify it is troubling. It reinforces the need not only for the public to be protected from Mr Karantzis' participation in the market, but also, as ASIC submits, for the court's determination of penalty to reflect a measure of specific and general deterrence.'
The penalty and disqualification orders follow an earlier judgment by Justice McEvoy finding that iSignthis:
- engaged in misleading or deceptive conduct by representing on 3 August 2018 that less than 15% of the company's total revenue in the fourth quarter to 30 June 2018 was from one-off or set-up fees (one-off revenue representation),
- failed to disclose from 3 August 2018 that in the fourth quarter to 30 June 2018 it had recognised approximately $3 million in one-off and non-recurring revenue and had incurred approximately $2.85 million in one-off costs, and
- failed to disclose from 12 May 2020 that VISA had terminated its relationship with iSignthis and failed to disclose VISA's reasons for termination.
Justice McEvoy also found Mr Karantzis:
- failed to exercise his powers and discharge his duties with reasonable care and diligence,
- was involved in the failure of iSignthis to comply with its continuous disclosure obligations regarding the recognition of revenues and costs in 2018, and
- failed to take reasonable steps to ensure information that he gave to the ASX regarding the termination by VISA was not false or misleading.
