An Australian federal court has found that payments firm iSignthis (now Southern Cross Payments) misled investors about its revenue and also failed to disclose the termination of a major Visa deal.
Misleading Investors
The company was found to have misled the investors by stating that less than 15 percent of its total revenue in the quarter ended on 30 June 2018 was from one-off or set-up fees. It further failed to disclose that it had recognised approximately $3 million in one-off and non-recurring revenue and had incurred approximately $2.85 million in one-off costs in the same quarter.
Additionally, the company failed to disclose in May 2020 that its deal with Visa was terminated.
“iSignthis shareholders and the market were entitled to have accurate and timely information about the company,” said Sarah Court, the Deputy Chair of ASIC, the agency that oversees the Aussie financial market.
Regulator Failed to Prove Allegations against Former CEO
ASIC also blamed the disclosure failure on the company's former managing director and CEO, Nickolas Karantzis. However, the court quashed the allegations, pointing out that the regulator failed to establish that Karantzis did not act in good faith and breached his duties as a director.
“It cannot be accepted that ASIC has proven to the requisite standard that Mr Karantzis failed to exercise his powers in good faith in the best interests of the corporation and for a proper purpose,” the judge stated in the ruling.
iSignthis offered identity verification, transactional banking, and payment processing services. The payment technology company was backed by Australia’s top hedge funds, including LHC Capital and Regal Funds Management.
However, iSignthis was suspended from trading by the ASX in October 2019, against which the company sued the market operator. Later, the company was renamed Southern Cross Payments and delisted from the ASX in November 2022.
Karantzis also severed his ties with the Australia-based Southern Cross Payments in 2021 and now operates the Cyprus-incorporated ISX Financial as the CEO.
