The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court against Adam Blumenthal alleging market rigging and breaches of his duties 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 to the effect that he will cease being involved in financial services for five years and from Everblu, his corporate advisory company, to the effect that it will cease offering financial services to new clients and apply for cancellation of its 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 relating to the receipt and execution of client orders, the use of its suspense account, the maintenance of records and the management of conflicts of interest.
ASIC’s investigation also revealed that Mr Blumenthal:
- as EverBlu’s director, failed to comply with EverBlu’s conflicts of interest policy and was involved 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 EverBlu clients, in breach of EverBlu’s personal dealing policy, to trade in ASX-listed Creso Pharma Limited (Creso) shares, a company of which Mr Blumenthal was also a director. This included lending Tyson Scholz, a 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 enabled certain client orders to purchase Creso shares, intending to represent to the market that there were more individual bidders for Creso shares than existed to create, or cause the creation of, a false or misleading appearance with respect to the market for Creso shares on the ASX.
ASIC’s court proceedings seek orders disqualifying Mr Blumenthal from managing corporations for five years and for the imposition of a pecuniary penalty.
ASIC alleges that Mr Blumenthal:
- breached his duties as a director of EverBlu;
- engaged in market rigging in relation to Creso shares;
- breached his duties as a director of Creso in relation to the engagement of Mr Scholz and another party, whose main trading entity was also an Everblu client, to provide marketing and promotional services for Creso. ASIC alleges that pursuant to these engagements, Creso paid Mr Scholz more than $2 million and the other party more than $1.2 million.
- breached his duties as Creso’s director by failing to avoid a conflict of interest given his financial relationship with Mr Scholz.
Under the terms of the court enforceable undertaking, EverBlu admits breaching its obligations to act honestly, efficiently and fairly and will cease offering any financial services to new clients and apply for cancellation of its AFS Licence within eight weeks.
Mr Blumenthal has undertaken not to be involved in financial services for five years and to undertake training prior to re-entering the industry.
