By Staff Writer
Something very strange, unusual and disturbing is going on at the Australian Securities and Investments Commission (ASIC). On top of the scandals with its two top leaders who have allegedly engaged in inappropriate utilization of agency funds at the expense of taxpayers, a potentially more important development has occurred during the litigation against a small startup called GetSwift Technologies Limited, a Canada-listed SaaS firm that previously traded in Australia. Remarkably, ASIC, which has been criticized by international legal experts for crusading at all costs, has in this case refused to acknowledge or provide any transparency with regards to the taxpayer expenses racked up in the case.
The cost to Australian taxpayers has been estimated at $18 million as of last August, according to the European Business Review. At that time, major GetSwift shareholder Charles Frischer described ASIC as “overly aggressive” and whose “goal or purpose is entirely unclear.”
On its face, the situation may not come as a shock. But it is deeply concerning that ASIC has refused numerous requests for transparency in such an expensive pursuit, including at least three requests made under the Freedom of Information Act, according to public filings.
Most surprising was ASIC’s justification for refusing the requests. Reasons range from the apparent amount of effort it would take to provide the information to a claim that it would prejudice any prosecution that was underway at the time.
One worrying murmur: There allegedly are thousands of ASIC timesheets related to the GetSwift matter – a staggering figure. Why is ASIC spending so much effort, taxpayer funds and resources on what should be a matter prior to going to trial? But all this is not even the tip of the iceberg.
This publication has reviewed the public filings that GetSwift has made over the last 3 years, and it is a sad and distressing saga. Turns out, the startup that had raised $74 million just prior to the enforcement attempts by ASIC has had to spend over $20 million on legal fees.
Assuming roughly equal legal bills for ASIC and GetSwift, there could be upwards of $50 million wasted on lawyers as a result of the crusade. Are we to infer that that the new norm for ASIC and the legal system in Australia is a $50 million legal tab in reckless pursuit of a startup? Perplexingly, the local Australian media appeared to egg ASIC on throughout, raising questions about the government’s influence over domestic press.
There are more troubling facts, beginning with a local media reporter who ran with an article asserting without basis that GetSwift had announced client contracts that didn’t exist. According to a source, that unscrupulous reporter reached out to GetSwift co-founder and President, Joel Macdonald, just after a large short position was taken against the company. When Macdonald tried to show the so-called journalist documentation of client contracts, he was refused and the article ran without an attempt to verify facts, the source said.
So what exactly did ASIC achieve by spending such a vast amount on its “investigation” and who approved it? Even should ASIC by some miracle prevail in court with its claims (and having reviewed the court transcripts one can honestly say that ASIC’s case is very weak and laden with inconsistencies, dubious witnesses and misdirected arguments), it seems impossible the commission would justify such an attack on a tech startup.
Meanwhile, what are the public and taxpayers to think regarding ASIC’s overly friendly relationship with Australian banks? Indeed, the country’s biggest bank, Commonwealth Bank of Australia, indicated that one of its own staff approved an announcement about a GetSwift contract. Seems that not everyone is being treated equally.
Another bizarre case of ASIC attacking a startup is iSignthis Ltd (ASX: ISX), which was accused of disclosure issues similar to those in GetSwift’s case. Unlike GetSwift, which has cooperated, ISX refused to turn over documents and moved its data out of the country where Australian regulators could not get their hands on it.
The ASX suspended ISX shares two years ago and they remain in limbo. In response, ISX has sued ASX for hundreds of millions of dollars, blaming the exchange for destroying shareholder value.
Both ISX and GetSwift have taken clear steps to bolster corporate governance but the measures were seemingly ignored by Australian regulators. ISX just named Professor Graeme Samuel, AC, a seasoned expert in corporate governance to the board of its subsidiary, ClearPay Pty Ltd. Similarly, GetSwift has added multiple governance experts to its board including Marc Naidoo, Stanley Pierre-Louis, and former deputy chair of the Australian Securities and Investments Commission, Belinda Gibson. Last year, GetSwift announced a new advisory board and the appointment of former Vermont Governor Howard Dean and General (Ret.) Mark Bowman as co-chairs.
In ISX’s case, there has at least been some acknowledgement of mistreatment by the Aussie press. Earlier in April, the Australian Financial Review was forced to apologize for accusing an executive of being involved in money laundering. Such an apology is essentially unheard of at top-tier papers such as The Wall Street Journal or The Financial Times which take great pride in accuracy and giving subjects of an article a chance to give their side. It raises further questions about possible entanglements between the Aussie press and the government.
Back to the money ASIC spent on the GetSwift case. Sources have informed this publication that ASIC staff may have taken extravagant trips overseas under the auspices of this case. Once again, Australian taxpayers deserve to know who authorized such a use of funds.
Our sources have also indicated that ASIC staff may have even broken local overseas laws as part of their zealous pursuit, and that the spillover effect of this is under investigation. Was ASIC subject to political pressure from perhaps external influences in this matter? And if so, why and to what purpose? None of ASIC’s behavior can be explained by its standard refusals of accountability or nonsensical justifications about deterrence.
All this now more than ever points to a need to investigate, evaluate and reform ASIC and its leadership. There is something very wrong going on at ASIC and its is doing great harm to not only the business climate, but in the public’s trust in the whole system. It is time to make a tough decision and call for a Royal Commission to examine in detail not only as to the processes and procedures that ASIC operated and operates under, but more significantly just what are the external influences that may have led to the absolute disaster that the agency has turned into. Failure to do so in our opinion will only accelerate the perception that Australia is not a fair and welcoming environment for smaller companies.
