The Federal Court has found iSignthis Ltd, now known as Southern Cross Payments Ltd, engaged in a number of contraventions of the law between 2018 and 2020.

Nickolas John Karantzis, its former managing director and chief executive officer, was also found to have breached the law, by failing to ensure information given to the ASX was not false or misleading as well as breaching his directors’ duties.

iSignthis was a business providing remote identity verification, transactional banking, and payment processing services. It was delisted from the ASX on 4 November 2022.

ASIC Deputy Chair Sarah Court said, ‘iSignthis shareholders and the market were entitled to have accurate and timely information about the company. This decision demonstrates ASIC’s commitment to take enforcement action to protect market integrity and uphold appropriate standards of corporate governance.’

The Court found iSignthis:

engaged in misleading or deceptive conduct by representing on 3 August 2018 that less than 15% of the company’s total revenue in the fourth quarter to 30 June 2018 was from one-off or set-up fees (one-off revenue representation);
failed to disclose from 3 August 2018 that in the fourth quarter to 30 June 2018 it had recognised approximately $3 million in one-off and non-recurring revenue and had incurred approximately $2.85 million in one-off costs,
failed to disclose from 12 May 2020 that VISA had terminated its relationship with iSignthis and failed to disclose VISA’s reasons for termination.
The Court found Mr Karantzis:

failed to exercise his powers and discharge his duties with reasonable care and diligence;
was involved in the failure of iSignthis to comply with its continuous disclosure obligations regarding the recognition of revenues and costs in 2018;
failed to take reasonable steps to ensure information that he gave to the ASX regarding the termination by VISA was not false or misleading.
The Court found ASIC did not make out its allegation that Mr Karantzis breached his duty to act in good faith and not use his position to gain an advantage for himself and his associates.

In his reasons, in the context of the one-off revenue representation, Justice McEvoy accepted ASIC’s submission that Mr Karantzis, “either knowingly misrepresented facts or intentionally or recklessly acted to prevent the truth from being disclosed.”

ASIC will seek pecuniary penalties against iSignthis and Mr Karantzis. ASIC will also seek orders that Mr Karantzis be disqualified from managing corporations.