The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Adam Blumenthal accused of market rigging and breach of duty as a director of two companies, EverBlu Capital Pty Ltd and Creso Pharma Limited (now known as Melodiol Global Health Limited).
ASIC has also accepted a court-enforceable undertaking from Mr Blumenthal that he will cease to be involved in financial services for five years and from Everblu, his corporate advisory firm, that he will cease to offer financial services to new clients and will apply to the cancellation of the Australian Financial Services (AFS) licence.
An ASIC investigation revealed that between 18 March and 15 November 2021, EverBlu breached its obligations as an AFS licensee by failing to properly follow procedures and put in place adequate controls over the receipt and execution of client orders, the use of her suspense account. record keeping and conflict of interest management.
ASIC’s investigation also revealed that Mr Blumenthal:
- as a director of EverBlu, failed to comply with EverBlu’s conflict of interest policy and engaged in EverBlu’s breaches of its obligations as an AFS licensee;
- facilitated loans from his private company, Anglo Menda Pty Ltd, to lend funds to certain customers of EverBlu, in breach of EverBlu’s personal trading policy, to trade in ASX-listed Creso Pharma Limited (Creso) shares, of which he was also Mr. Blumenthal a director. This included lending Tyson Scholz, a well-known market finfluencer and EverBlu client, more than $7 million and another Everblu client more than $5 million.
- engaged in market rigging when on 14 occasions (on 10 separate days) he caused or permitted certain customer orders to buy Creso shares, intending to represent to the market that there were more individual bidders for Creso shares than there were for the creating or making a false or misleading appearance in relation to the market for Creso’s shares on the ASX.
ASIC’s legal proceedings seek orders to disqualify Mr Blumenthal from managing companies for five years and impose a fine.
ASIC alleges that Mr Blumenthal:
- breached his duties as a director of EverBlu.
- engages in market rigging in relation to Creso’s shares;
- breached his duties as a director of Creso in relation to the engagement of Mr Scholz and another party, whose main commercial entity was also a customer of Everblu, to provide marketing and promotional services for Creso. ASIC alleges that, under these undertakings, Creso paid Scholz more than $2 million and the other party more than $1.2 million.
- breached his duties as a director of Creso by failing to avoid a conflict of interest due to his financial relationship with Mr. Scholz.
Under the terms of the court-enforceable undertaking, EverBlu admits it is in breach of its obligations to act honestly, efficiently and fairly and will stop offering financial services to new customers and apply to cancel its AFS License within eight weeks.
Mr Blumenthal has pledged to stay out of financial services for five years and undertake training before re-entering the industry.