ASIC has launched civil proceedings in the Federal Court against controversial electronic money provider iSignthis and its founder John Karantzis.
If successful, the legal action could result in pecuniary penalties against iSignthis and orders that would disqualify Karantzis from managing companies.
The corporate watchdog is alleging the company failed to meet its continuous disclosure obligations in relation to agreements it made with three clients in 2018.
ASIC alleges that one-off and non-recurring revenues derived from the agreements enabled the company to achieve performance milestones that triggered the allocation of more than 336 million performance shares, most of which were issued to Karantzis and other directors.
“ASIC also alleges iSignthis made misleading representations about the revenues derived from the three integration agreements in an analyst briefing given by Mr Karantzis on 3 August 2018, when it stated that iSignthis’ revenue for one-off or up-front fees accounted for less than 15 per cent of the total revenue in the fourth quarter to 30 June 2018, when ASIC alleges it actually amounted to 75 per cent of the total unaudited revenue for that period,” ASIC said in a statement.
The regulator also alleges in the claim that in April of this year iSignthis failed to disclose that global payments provider VISA had terminated its relationship with the company.
According to ASIC, VISA severed commercial ties because iSignthis was not operating appropriate programs to manage anti-money laundering and risk.
In a statement to the ASX, iSignthis acknowledged the ASIC proceedings but did not say whether it intended to defend the claims.
“The company notes that the claim is focussed on its disclosures regarding integration agreements executed in the first half of 2018 and the suspension and termination of its commercial arrangement with Visa earlier this year,” iSignthis told the ASX.
“The company will make a further announcement, if appropriate, when it has had the opportunity to consider the allegations.”
Trading in iSignthis shares was suspended in September 2019 when the ASX and ASIC announced that they were investigating issues concerning the company.