An Australian company that collapsed last year has been hit with a damning Federal Court judgment and slapped with a $15 million fine, with the court describing the failed firm as the “unacceptable face of start-up capitalism”.
It handed down the largest ever penalty against the software company GetSwift for breaching continuous disclosure laws, according to corporate regulator ASIC.
In a damning 70 page judgment, the court described Getswift as a company that “became a market darling because it adopted an unlawful public-relations-driven approach to corporate disclosure instigated and driven by those wielding power within the company”.
It outlined how GetSwift would make ASX announcements about landing major clients when they were only trialling or contemplating trialling the service – rather than generating revenue, including for Amazon and Yum Brands.
ASIC took the business and its directors to court for deceptive and misleading conduct in 2019.
In November 2021, the court found that Getswift made 40 misleading and deceptive statements in its announcements on the ASX and breached its continuous disclosure obligations on 22 occasions between February and December 2017.
Getswift later went into liquidation in August last year, while its Canadian parent company also entered bankruptcy in the US,
Its former director, CEO and executive chairman, Bane Hunter, was ordered to pay a penalty of $2 million and disqualified from managing corporations for 15 years, with the court describing him as the “principal instigator of the wrongdoing” by the judge.
Meanwhile, former managing director and AFL footballer Joel Macdonald was fined $1 million and banned for 12 years.
Both men had received two of the highest penalties ordered against directors for corporate misconduct, according to ASIC.
Justice Michael Lee said in his judgment that Mr Hunter “had a laser-like focus on making money for himself and Mr Macdonald and if that involved breaking the law regulating financial markets, or exposing GetSwift to third party liability, that was of little concern to him”.
Former non-executive director Brett Eagle was also ordered to pay $75,000 and banned for two years from managing corporations.
Justice Lee also took aim at the lack of remorse by those involved and in particular said Mr Hunter was “unrepentant and lacks any insight into his conduct” and “should not be in charge of the affairs of a company”, adding ASIC had been unable to “explore where all the money raised from investors went”.
Getswift had raised $104 million from investors.
“There is no evidence of contrition or remorse by the two of the company’s senior officers primarily responsible,” he said.
“Indeed, such evidence as there is points in the opposite direction. That Mr Macdonald feels a ‘level of peace’ is not only cold comfort to those that have suffered loss, but also reflects a troubling and defiant lack of insight into the scale and seriousness of the wrongdoing set out in excruciating detail in the [court ruling].”
He also found Mr Macdonald was focused on making money and had “little understanding or regard for his legal obligations as a director”.
Justice Lee criticised the founders for failing to return to Australia after the collapse of the company.
“Bane Hunter … has not returned to Australia to defend his position and did not appear at the penalty hearing,” Justice Lee said.
“His lieutenant, Joel Macdonald, after initially appearing at a case management hearing, has also not turned up to defend himself.”
While he credited ASIC for the regulatory action taken, Justice Lee added it was “pity” that GetSwift was “not stopped sufficiently quickly and assets were not preserved” as one transfer saw $72,000 leave the company’s bank accounts.
“On 22 August 2018, following the commencement of an investigation by the Australian Securities and Investments Commission in February 2018, GetSwift Logistics transferred an additional $8,500,000 to an offshore bank account held by GetSwift Inc, bringing the total funds transferred to $80,500,000,” he said.
“These transactions were unexplained by any evidence before me.”
Last month, Federal Court judge Bernard Murphy described the GetSwift collapse as a “scandalous episode in corporate misconduct” when he approved a class action settlement where victims would be lucky to get 1c for every dollar invested, describing it as “an unhappy day” for investors.
“An early-stage tech company, primarily through its managing director Joel Macdonald and executive chairman and CEO, Bane Hunter, embarked on a systematic program of pumping up the GetSwift share price, through overly positive and thus misleading announcements to the ASX,” he added.
GetSwift, Mr Hunter, Mr Macdonald and Mr Eagle have also been ordered to pay ASIC’s costs.
In January 2021, GetSwift delisted from the ASX and re-domiciled to Canada’s NEO Exchange after the Federal Court approved GetSwift’s scheme of arrangement to create a new Canadian holding company, GetSwift Technologies Ltd.
After the Judgement was handed down, ASIC deputy chair Sarah Court said disclosure is critical to market integrity and consumer protection.
“The penalties imposed by the court demonstrate the extent and seriousness of the misconduct in this matter and the importance placed by the court on deterring others from engaging in similar behaviour,” she said.
