The Federal Court has ordered iSignthis Ltd, now known as Southern Cross Payments Ltd, to pay a $10 million penalty for breaching disclosure laws, and has disqualified the company’s former managing director and chief executive, Nickolas John Karantzis, from managing corporations for six years. Mr Karantzis was also penalised $1 million for breaching his director’s duties and failing to ensure information provided to the ASX was not false or misleading.
iSignthis, which provided remote identity verification, transactional banking and payment processing services, committed multiple contraventions between 2018 and 2020. The company changed its name to Southern Cross Payments Ltd (ASX:SP1) in May 2022 and was delisted from the ASX on 4 November 2022.
Announcing the penalty and disqualification orders, ASIC Deputy Chair Sarah Court said, ‘The Court has found that iSignthis and Mr Karantzis demonstrated repeated disregard for the law through deliberate acts of non-disclosure and by providing false and misleading information to the ASX.’
‘This conduct resulted in significant periods of time where both the market and investors were misinformed.
‘ASIC is committed to taking enforcement action to protect market integrity and uphold appropriate standards of corporate governance.’
The orders follow an earlier liability judgment by Justice McEvoy, delivered on 21 June 2024, which found that iSignthis engaged in misleading or deceptive conduct and breached continuous disclosure obligations. The Court found the company misled the market on 3 August 2018 by representing that less than 15% of its total revenue in the quarter to 30 June 2018 came from one-off or set-up fees, while failing to disclose that it had recognised about $3 million in one-off and non-recurring revenue and incurred about $2.85 million in one-off costs in that period. The Court also found iSignthis failed to disclose from 12 May 2020 that Visa had terminated its relationship with the company and did not disclose Visa’s reasons for termination.
In relation to Mr Karantzis, Justice McEvoy found he failed to exercise his powers and discharge his duties with reasonable care and diligence, was involved in the company’s failure to comply with continuous disclosure obligations regarding the recognition of revenues and costs in 2018, and failed to take reasonable steps to ensure information he provided to the ASX about the Visa termination was not false or misleading.
In his reasons, Justice McEvoy said, ‘The community is entitled to expect that investors will not be misled, the market operator will be respected, and that questions asked by the market operator will be answered accurately and devoid of spin and obfuscation.’
‘Mr Karantzis’ tendency to try to minimise the seriousness of his conduct and in some respects to justify it is troubling. It reinforces the need not only for the public to be protected from Mr Karantzis’ participation in the market, but also, as ASIC submits, for the court’s determination of penalty to reflect a measure of specific and general deterrence.’
ASIC commenced civil penalty proceedings in December 2020 against iSignthis and Mr Karantzis. The court’s latest orders cap a protracted enforcement action centred on the company’s revenue recognition practices, disclosure of one-off items and the handling of market-sensitive information relating to Visa.
The judgment underscores the heightened expectations on listed entities to provide accurate, timely information to the market, and the personal accountability of directors overseeing those disclosures.
