Australian Court imposes $850k penalty on former EverBlu director for market rigging
Australia’s Federal Court has ordered Adam Blumenthal, former director of EverBlu Capital Pty Ltd (EverBlu) and Creso Pharma Limited, to pay a penalty of $850,000 and be disqualified from managing corporations for five years.
The Court ruling follows an action brought by the Australian Securities and Investments Commission (ASIC).
On 17 April 2024, the Court found:
- Mr Blumenthal engaged in market rigging on 14 occasions in relation to the placing of orders for EverBlu clients to purchase shares in ASX-listed Creso,
- breached his duties as a director of EverBlu in relation to his failure to comply with its compliance policies and causing it to breach its obligations as an Australian financial services (AFS) licensee which jeopardised its interests,
- breached his duties as a director of Creso in relation to the engagement of Mr Tyson Scholz (a client of EverBlu) and another party (whose main trading entity was also an EverBlu client) to provide marketing and promotional services for Creso. Under these engagements, Creso paid Mr Scholz more than $2 million and the other party more than $1.2 million, in the absence of sufficient due diligence or imposing measurable deliverables, and
- breached his duties as a director of Creso by failing to avoid and disclose to its board a conflict of interest, given his financial relationship with Mr Scholz where Mr Blumenthal’s private company, Anglo Menda Pty Ltd, had lent more than $7 million to Mr Scholz to fund his trading in Creso shares.
Justice Stewart observed that the market rigging contraventions in this matter go ‘hand in hand’ with the director’s duties contraventions and ‘also go to the heart of the financial system and the necessity for public confidence in it.’ His Honour added that the market rigging contraventions ‘were serious, deliberate, repeated and occurred over a period of around eight months’ and that these matters justified the need for a significant penalty.
The Court has also ordered Mr Blumenthal to pay $100,000 towards ASIC’s costs of the proceeding.
Mr Blumenthal admitted to contraventions of sections 1041B(1)(b), 180(1) and 181(1)(a) of the Corporations Act 2001 and agreed to the relief the parties proposed to the Court.