Dubber co-founder, lawyer barred from leaving Australia as ASIC investigates missing $26.6m

Dubber co-founder, lawyer barred from leaving Australia as ASIC investigates missing $26.6m

Dubber managing director and CEO Stephen McGovern has been suspended from this role as ASIC continues investigating how $26.6 million in company funds have gone missing. 

The co-founder and suspended CEO of call recording software company Dubber (ASX: DUB), Stephen McGovern, has been banned from leaving Australia until mid-September as the nation’s corporate watchdog continues to investigate how $26.6 million of the company’s funds have gone missing.

The Australian Securities and Investments Commission (ASIC) commenced an investigation into McGovern earlier this month, which was prompted after Dubber alerted the agency and ASX that McGovern was suspended from his role as managing director and CEO.

ASIC has expressed concern that McGovern and Mark Madafferi - a solicitor and principal of North Melbourne law firm Christopher William Legal - may have breached the Corporations Act in a suspected misuse of term deposit funds of Dubber or one of its subsidiaries, purportedly held on trust by Madafferi.

The latest ruling, which was made by the Federal Court after an application by ASIC, prevents McGovern and Madafferi from leaving or attempting to leave Australia until 13 September 2024 or until further orders.

It comes three weeks since Dubber announced to shareholders that an audit review of its half-year accounts flagged that funds which were held on behalf of the company by a third-party trustee were no longer available.

“A preliminary investigation by the company has uncovered that funds, purported to have be held in a term deposit account, may have been applied for other purposes and are not currently available to the company,” Dubber told shareholders in an announcement on 1 March.

“Approximately $3.4 million of these funds has been recovered and, as it continues its investigation into this matter, the company is evaluating avenues for further recovery of the balance and action that may be required to support any additional funding requirements as a result.

“As at the date of this announcement the company’s maximum exposure is approximately $26.6 million.”

At the same time, Dubber revealed it had suspended McGovern with “immediate effect”, appointing executive director Peter Pawlowitsch as acting CEO.

Dubber’s investors include Melbourne billionaire Alex Waislitz, who recently came to the company’s rescue with a $5 million bridging loan. He has also increased his shareholding from 15 per cent to 19.9 per cent via his investment vehicle Tiga Trading.

The company has maintained its full-year revenue guidance of $45 million, reflecting a 50 per cent increase on 2023, and noted that delivery of Dubber services to its global customer base was unaffected.

“The company will provide further updates on any material developments in this matter and continues to work with its auditor, Ernst and Young, to finalise and release its 31 December 2023 half-year accounts,” Dubber said to shareholders.

As the hearing was held in the absence of both McGovern and Madafferi, neither has been given the chance to respond to ASIC’s application. While McGovern is a British national with a permanent residence in Australia, Madafferi is a citizen of Australia.

The next hearing is due before the court on 27 March.

Shares in DUB remain suspended.

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