Failed tech company GetSwift, slammed by a judge as being the “unacceptable face of start-up capitalism”, has been hit with a $15 million fine - the largest penalty of its kind handed down by the Federal Court.
A $2 million penalty has also been handed to GetSwift’s former CEO Bane Hunter, while former director Joel Macdonald was hit with a $1 million fine in the aftermath of what Federal Court Justice Michael Lee has concluded was a “scandalous episode of corporate misconduct”.
The former directors were fined for taking a “public-relations-driven approach” to their continuous disclosure obligations on the ASX, with the judge also blasting them for not showing “the slightest degree of remorse or contrition” or acknowledging “they behaved improperly”.
Hunter and Macdonald were also banned from managing corporations for 15 years and 12 years respectively, which the Australian Securities and Investments Commission (ASIC) says are two of the highest penalties ordered against directors for corporate misconduct.
Another former GetSwift director, Brett Eagle, a person that Justice Lee accepts was “bullied” by Hunter, has been fined $75,000 and banned from managing corporations for two years.
“When it came to directing the affairs of the company, Mr Hunter was the man in charge, Mr Macdonald was his important ally, and Mr Eagle was a significantly less important player," Justice Lee says in his judgement.
The Federal Court judgement brings an end to a five-year investigation by ASIC that led to civil proceedings against GetSwift and its directors in early 2019.
“To adapt the famous remark of Ted Heath, GetSwift, and those primarily responsible for its wrongful conduct, could be described as representing the unacceptable face of start-up capitalism,” says Justice Lee in his judgement.
The loss-making early-stage technology company, which became a market darling with the promise of rolling out its cloud-based last-mile logistics software to a global market, raised $104 million from investors through two capital raisings before collapsing in 2019.
The court had previously found that GetSwift and its directors had made numerous misleading announcements to the ASX and that it had breached its continuous disclosure obligations on 22 occasions between February and December 2017.
Among the claims made by the company were that it had secured Amazon, the Commonwealth Bank of Australia (ASX: CBA) and Yum Brands as clients, although it was later discovered that these companies were simply trialling GetSwift’s products.
Justice Lee’s assessment of Hunter was that he “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”.
Justice Lee says Macdonald had “little understanding or regard for his legal obligations as a director”.
He describes 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”.
The GetSwift fallout has played out in Canada as well as Australia. When GetSwift delisted from the ASX in January 2021, it moved to Canada’s NEO Exchange following a scheme of arrangement approved by the Federal Court to create a new Canadian holding company, GetSwift Technologies Ltd. ASIC opposed the scheme at the time.
The Canadian parent was placed into voluntary liquidation in July last year.
The liquidation of the parent has left investors who had successfully secured a $1.5 million settlement in an earlier class action against the company unlikely to see a cent of these funds.
Justice Lee notes that Hunter, the “principal instigator of the wrongdoing of GetSwift, has not returned to Australia to defend his position and did not appear at the penalty hearing”.
“His lieutenant, Mr Joel Macdonald, after initially appearing at a case management hearing, has also not turned up to defend himself,” he says in the judgment.
The former directors were also admonished for “putting ASIC to proof in every aspect of its intricate case and requiring expenditure of vast public resources”.
ASIC’s deputy chair Sarah Court describes disclosure by corporations as “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.
“ASIC will continue to take action to hold companies and individuals to account for corporate misconduct of this kind.”
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