Australia's Federal Court appeals bench upheld a six-year ban preventing former iSignthis Ltd. CEO Nickolas John Karantzis from managing companies and kept A$11 million in civil penalties in place.
In its Nov. 2 ruling, the Full Court left a A$10 million penalty against iSignthis, now named Southern Cross Payments Ltd., for continuous disclosure breaches. Karantzis' A$1 million penalty also covers breaches of directors' duties and false or misleading answers to the Australian Securities Exchange. Both must pay the Australian Securities and Investments Commission's (ASIC) appeal costs.
The revenue dispute concerned whether investors could distinguish recurring payments income from fees earned once. Karantzis put one-off integration and setup fees at less than 15% of revenue for the June 30 quarter during an Aug. 3, 2018, analyst briefing. The court found they accounted for more than 75% of unaudited quarterly revenue.
iSignthis had reported revenue for that quarter, but failed to disclose that about A$3 million came from one-off services or that associated costs totaled about A$2.85 million.
A separate disclosure failure involved Visa. It first communicated its decision to end its relationship with iSignthis on April 17, 2020. The company's duty to disclose the decision and Visa's stated reasons began May 12, when Visa confirmed the decision was final. The court upheld the finding that iSignthis failed to make that disclosure.
The judges said the failures harmed the market's integrity even though no individual shareholder's loss had been quantified.
Karantzis succeeded in narrowing one declaration about what he should have known when making the 2018 revenue statement. Its earlier wording exceeded the trial judge's findings, which did not establish that the statement was intentionally dishonest. The correction did not alter the liability findings, penalties or ban.
