ASIC roundup: greenwashing claims, and bankruptcy orders against finfluencer

The Australian Securities & Investments Commission’s latest actions and news, February 19 – March 1, 2024.

Director disqualified after failure of seven companies – March 1, 2024

Alaa El Hassan has been disqualified from managing corporations for five years for being involved in the failure of seven companies, all of which went into liquidation during 2018 and 2019. The companies operated across industries such as hospitality, construction, cleaning and electrical industries, and included:

  • AHS Trading Trading Australia Pty Ltd;
  • Rentile Management Services Pty Ltd;
  • MZ Superior Cleaning Pty Ltd;
  • Seacliff Functions Pty Ltd;
  • Unique Cleaning Australia Pty Ltd;
  • M.O. Electromaster Group Pty Ltd; and
  • FF Investments Australia Pty Ltd.

At the time of ASIC’s decision, the companies owed a combined total of A$3,723,402.16 ($2,420,535) to unsecured creditors, included A$2,879,671.46 ($1,871,752) to the tax office, A$547,346 ($355,768) to Revenue NSW and A$23,246 ($23,246) to former employees, of which the majority of A$21,246 ($13,812) was unpaid superannuation.

As a director of the companies, Hassan was found to have failed to meet his obligations when he:

  • failed to make sure that six companies paid their tax debts;
  • could not prepare accurate financial statements by failing to maintain books and records for AHS Trading Trading Pty Ltd and MZ Superior Cleaning Pty Ltd;
  • failed to participate in the management of AHS Trading Trading Pty Ltd when the company sold its only incoming producing assets and did not receive any proceeds for the sale;
  • acted as a shadow director and was “appointed to shield the true directors from the personal liability associated with the companies’ significant statutory liabilities”; and
  • failed to ensure that four companies complied with their statutory lodgement obligations with the tax office.

Hassan was also convicted and fined A$800 ($520) in December 2019 for breaching section 530A of the Corporations Act for failing to deliver all of the books and records of Rentile Management Services. He was then convicted and fined again in June 2021, this time for A$3,000 ($1,952) for the same thing, again with Rentile Management Services.

Orders to wind up Prospero Markets Pty Ltd – March 1, 2024

ASIC has applied to the Federal Court to wind up retail OTC derivative issuer Prospero Markets Pty Ltd on just and equitable grounds.

An investigation into Prospero started after the Australian Federal Police’s Operation Avarus-Nightwolf, which resulted in former company officers and managers being charged with money-laundering offences in October 2023 relating to the Changjiang Currency Exchange money remitting chain.

ASIC concerns included the management of Prospero’s business, complying with conditions of the Australian Financial Services Licence (which was also suspended in December 2023), and obligations as an OTC derivatives issuer under the Corporations Act. Prospero is also believed to be holding “substantial client funds”, which ASIC is keen to see returned to clients as a priority.

ASIC successfully appeals ACBF and Youpla misrepresentations case – February 29, 2024

ACBF Funeral Plans Pty Ltd (ACBF) have been found to have misrepresented to Aboriginal consumers that it was Aboriginal owned or managed, after the Full Court upheld ASIC’s appeal in its case against ACBF and Youpla Group Pty Ltd (owner of ACBF).

The Full Court’s decision overturns part of an earlier Federal Court decision, and proceedings will now be remitted to the trial judge to determine the appropriate penalty.

ACBF and Youpla went into liquidation in March respectively April 2022. However ASIC sought and obtained leave to continue the proceedings because of “the importance of general deterrence in relation to ACBF’s conduct”.

“Today’s decision provides some formal acknowledgment of that harm and will be a deterrent to anyone who tries to mislead Aboriginal consumers about whether a business is Aboriginal owned or managed.”

Sarah Court, Deputy Chair, ASIC

Interim stop order to Urban Rampage – February 29, 2024

An interim stop order has been made against Coral Coast Distributors (Cairns) Pty Ltd (CCD), preventing the company from having customers at its Urban Rampage retail stores enter payment agreements on credit through Centrepay deductions.

The Commission is worried that the targeted consumers are low-income recipients of Centrelink benefits, residing in remote Indigenous communities, or without access to other forms of credit. These people could be vulnerable, at risk of financial hardship and experiencing financial distress.

The interim stop order is valid for 21 days unless revoked earlier. However it does not prevent CCD from offering alternate payment options for goods, such as cash or card.

“ASIC is concerned that this deficiency reflects CCD’s inability to ensure that this kind of credit facility is suited to the needs of consumers in its target market.”

Sarah Court, Deputy Chair, ASIC

Bankruptcy orders against social media finfluencer – February 29, 2024

Orders to make social media finfluencer Tyson Robert Scholz bankrupt have been in court after Scholz failed to pay costs of A$456,296.64 ($296,644) that were ordered by the court in December 2021.

In December 2022, Scholz was found to have contravened s911A of the Corporations Act by carrying on a financial services business without a financial services licence between March 2020 and November 2021. Permanent injunctions were then made in April 2023, prohibiting him from carrying on a financial services business, and he was ordered to pay the costs of the proceedings brought by ASIC.

Infringement notice to Melbourne Securities for greenwashing – February 28, 2024

Melbourne Securities Corporation Limited has paid A$13,320 ($8,654) to comply with an infringement notice over alleged misleading statements regarding its Bloom Climate Impact Fund.

From March 2022 to June 2023, statements were made in the Fund’s Product Disclosure Statement (PDS) that it would seek to avoid investing in a range of excluded activities, including in fossil fuels.

Still, the Bloom Fund used revenue thresholds which allowed it to invest in companies that derived up to 33% revenue from excluded activities, such as fossil fuel investments. That included the Bloom Fund acquiring and holding a direct investment in General Electric Co which derived 16% of its revenue from fossil fuels in the FY of 2022.

As at the date of its termination, the Fund had about A$1.7m ($1.1m) in funds under management. 

Before this case, ASIC had also issued 16 other infringement notices in relation to alleged ESG misconduct:   

The Commission currently has three greenwashing-related civil penalty actions before the Federal Court against, which include Mercer Super, Vanguard Investments Australia, and Active Super.

Interim travel restraint orders against former director – February 28, 2024

Interim travel restraint orders have been made against former Blockchain Global Limited (now in liquidation) director Liang Guo (also known as Allan Guo).

The Commission is currently investigating Guo and two other company directors, Samuel Xue Lee and Zijang (Ryan) Xu, over their roles in the collapse of crypto-asset exchange ACX Exchange.

Blockchain Global operated the exchange between January 2016 until its collapse in December 2019. The travel restraint orders were made to prevent Guo from leaving or attempting to leave Australia until August 20, 2024, or until further order.

Cancelled licence of NextGen Financial Group Pty Ltd – February 27, 2024

The Australian financial services (AFS) licence has been cancelled for NextGen Financial Group Pty Ltd after a court order to wind up the company due to insolvency in November 2023.

Accepted undertaking from former financial adviser – February 21, 2024

The Commission has accepted a court-enforceable undertaking from Shivdeep Jaidka, a former financial adviser from Melbourne. 

In an earlier review of Jaidka’s financial services, ASIC found that Jaidka failed to comply with s961B and s961G of the Corporations Act in relation to Self Managed Superannuation advice. 

With the courts enforceable undertaking, Jaidka, has agreed to not, for five years:

  • carry on a financial services business or provide financial services; or
  • act in a managerial capacity of any entity operating a financial services business or providing legal, accounting or other advisory services to a financial services business.

Cancelled licence of Valorton Capital  – February 19, 2024

The AFS license of Valorton Capital Pty Ltd has been cancelled due to findings that the company has not provided any financial services since the licence was granted in October 2022.

ASIC news weeks 8-9

Call to action

After ‘concerning’ results of reviewing retirement outcomes for Australians, ASIC is now calling on super trustees, financial advisers, and financial advice licensees to “more consistently focus on the performance of Choice super investment options”.

In the Commission’s review, it often found insufficient emphasis on and a lack of transparency around Choice investment options that failed to meet performance expectations. It also showed little of trustees’ communication to members about the performances, and that financial advisers were not always addressing set underperformance.

“Members should be informed about their super investments – not left in the dark if their super investments are not performing as expected, and there may be better alternatives,” said ASIC Commissioner Simone Constant.

With the issues, ASIC says that trustees, advice licensees, and advisers need to undertake performance-focussed due diligence before offering investments to members. ASIC also expects the trustees to:

  • prioritize investment performance throughout the product lifecycle;
  • have systems to detect and address persistent underperformance;
  • frequently monitor performance against return objectives and benchmarks;
  • have adequate capacity to manage investment options, including proper policies, resources, and data reporting arrangements;
  • communicate with members about performance; and
  • act in response to sustained underperformance to minimise member risks.

As of September 2023, Choice products accounted for over A$1.1 trillion ($0.7 trillion) in superannuation savings across 7.5 million member accounts.

Scam warning

“It’s a scam! Celebrities are not getting rich from online investment trading platforms.”

That was the headline on a warning to consumers sentb out by the National Anti-Scam Centre, together with ASIC and the Australian Government. It warns consumers to beware of fake news articles and deepfake videos of public figures that promote online investment trading platforms.

Last year, more than A$8m ($5.2) was lost to online investment scams, with 400 reports made to Scamwatch.

“We are urging Australians to take their time and do their research before taking up an investment opportunity – particularly those seen on social media,’ ACCC Deputy Chair Catriona Lowe said.

“We know of an Australian man who lost $80,000 in cryptocurrency after seeing a deepfake Elon Musk video interview on social media, clicking the link and registering his details through an online form. He was provided with an account manager and an online dashboard where he could see his investment supposedly making huge returns. But when he tried to withdraw the money – he was locked out of his account.”

According to Scamwatch, the most prolific online platform scam appears under the brand ‘Quantum AI’. Others include ‘Immediate Edge’, ‘Immediate Connect’, ‘Immediate X3’, and ‘Quantum Trade Wave’.