Two directors of Australian company Open4Sale Global Ltd have been penalised a total of $2.8 million by the Federal Court for breaching disclosure laws.

The Federal Court found that Open4Sale, its managing director Simeon La Barrie and Australian director Ewald Hafer breached the law when raising over $1.3 million from 83 investors between March 2019 and July 2023 without providing compliant disclosure documentation to ASIC or investors.

Mr La Barrie, who on two occasions referred to shareholders as ‘idiots’ in professional correspondence seen by the Court, was fined $2 million for his role in the breaches.

When asked about the preparation of audited financial statements, Mr La Barrie said that he had refused to have the audits performed by accounting firm BDO because he objected to the cost. He said, “in my nice language I told them where to go because I wasn’t going to pay them $50,000”. He later said that he was not going to pay $50,000.00 “for a bunch of idiots”.

Mr Hafer was fined $800,000. The Court declined to order penalties against Open4Sale.

The pitch decks made unverified claims that Open4Sale would make US$57 billion in revenue in five years, despite having no reasonable basis for these forecasts. Financial reports received by the Court showed that Open4Sale generated no income between 2016 and 2022 and accumulated nearly $9 million in net losses.

Evidence before the Court also showed that Mr La Barrie transferred over $1.4 million of investor money to accounts associated with him, using some of it to pay for personal expenses such as rent and school fees.

In delivering her decision, Justice Charlesworth noted the seriousness of this conduct, saying, ‘the evidence discloses a disgraceful course of conduct on the part of Mr La Barrie, accompanied and explained by his defiant attitude to the law.’

Her Honour noted that Mr Hafer, who received $137,975 in commissions for signing on new investors since 2019, had the ability to stop raising money from investors while there was no accompanying disclosure document but failed to do so. ‘The inference arises that Mr Hafer chose instead to continue to breach the Corporations Act because he personally benefited from attracting yet more investment by his receipt of a commission, and I so find,’ Her Honour said.

Her Honour also rejected submissions that the conduct had not yet caused harm, noting that the company’s records ‘are so poor it is not possible to discern its actual financial position.’

In addition to their pecuniary penalties, Mr La Barrie has been disqualified from managing corporations for 12 years and Mr Hafer for 8 years.

Mr La Barrie and Open4Sale are both restrained from future non-compliant fundraising for 12 years, and Mr Hafer for 8 years.

Mr La Barrie, based in the United States, is the founder and managing director of Open4Sale. He approved the issuing of shares to investors and controlled the bank account into which investors’ funds were received.

Mr Hafer is an Australian director of Open4Sale, who met with investors to distribute application forms for offers of shares.