Australian Securities and Investments Commission v iSignthis Limited (Penalty)

[2025] FCA 917

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v iSignthis Limited (Penalty) [2025] FCA 917

File number(s):

VID 773 of 2020

Judgment of:

MCEVOY J

Date of judgment:

8 August 2025

Catchwords:

CORPORATIONS – disqualification orders and pecuniary penalties sought against director and company – where serious contraventions of ss 180, 674(2A) and 1309(1) and (12) of the Corporations Act 2009 (Cth) by director – where serious contravention of s 674(2) of the Act by company – where contraventions involved misleading market and market operator – where contraventions had serious impact on market – where contraventions were deliberate and continuing – where there is an absence of contrition and cooperation – asserted mitigating factors including reliance on external legal advice are not exculpatory – nature and extent of contraventions, protection of the public, and deterrence justify disqualification and pecuniary penalties to be ordered in respect of director – nature and extent of the contraventions and deterrence justify pecuniary penalty to be ordered in respect of company

Legislation:

Corporations Act 2001 (Cth) ss 180, 104H, 206C(1), 206E(1), 674(2), 674(2A), 1309, 1317E, 1317G

Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act2019 (Cth)

Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth)

Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68
Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union (2020) 299 IR 231
Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450
Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238
Australian Securities and Investments Commission v Adler [2002] NSWSC 483
Australian Securities and Investments Commission v AGM Markets Pty Ltd (In Liq) (No 4) [2020] FCA 1499
Australian Securities and Investments Commission v Austal [2022] FCA 1231
Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited (No 3) [2020] FCA 1421
Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (No 3) [2023] FCA 1565
Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2005] FCA 860
Australian Securities and Investments Commission v Beekink [2007] FCAFC 7
Australian Securities and Investments Commission v Blue Star Helium Ltd (No 4) [2021] FCA 1578
Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [2011] FCA 372
Australian Securities and Investments Commission v Donovan (1998) 28 ACSR 583
Australian Securities and Investments Commission v Forex Capital Trading Pty Ltd [2021] FCA 570
Australian Securities and Investments Commission v GetSwift Limited (Penalty Hearing) [2023] FCA 100
Australian Securities and Investments Commission v Healey (No 2) (2011) FCR 430
Australian Securities and Investments Commission v Helou (No 2) [2020] FCA 1650
Australian Securities and Investments Commission v Holista Colltech Ltd [2024] FCA 244
Australian Securities and Investments Commission v iSignthis Limited [2024] FCA 669
Australian Securities and Investments Commission v Lanterne Fund Services Pty Ltd [2024] FCA 353
Australian Securities and Investments Commission v Macquarie Bank Limited [2024] FCA 416
Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd [2021] FCA 1630
Australian Securities and Investments Commission v Mercer Financial Advice (Australia) Pty Ltd [2023] FCA 1453
Australian Securities and Investments Commission v Mitchell (No 3) [2020] FCA 1604
Australian Securities and Investments Commission v MLC Limited [2023] FCA 539
Australian Competition and Consumer Commission v Murray Goulburn Co-Operative Co Ltd [2018] FCA 1964
Australian Securities and Investments Commission v Noumi Ltd [2024] FCA 862
Australian Securities and Investments Commission v Rich [2003] NSWSC 186
Australian Competition and Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135
Australian Securities and Investments Commission v Ryan [2024] FCA 1267
Australian Securities and Investments Commission v Select AFSL Pty Ltd (No 3) [2023] FCA 723
Australian Securities and Investments Commission v Sino Australia Oil and Gas Ltd (in liq) [2016] FCA 1488
Australian Securities and Investments Commission v Web3 Ventures Pty Ltd [2024] FCA 578
Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 2147
Australian Securities and Investments Commission v Westpac Banking Corporation (No 3) [2018] FCA 1701
Australian Securities and Investments Commission v Vocation Ltd (in liq) (No 2) [2019] FCA 1783
Blairv Curran (1939) 62 CLR 464
Commission for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519
Construction, Forestry, Maritime, Mining and Energy Union v Fair Work Ombudsman (2023) 322 IR 233
Cruickshank v Australian Securities and Investments Commission (2022) 292 FCR 627
Impiombato v BHP Group Limited (No 5) [2024] FCA 591
Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission (2022) 295 FCR 106
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
United Voice v MDBR123 Pty Ltd (No 2) [2015] FCA 76
Vines v Australian Securities and Investments Commission [2007] NSWCA 126
Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission (2021) 284 FCR 24

Division:

General Division

Registry:

Victoria

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

315

Date of hearing:

21-22 October 2024

Date of last submissions:

17 December 2024

Counsel for the Plaintiff:

M Borsky KC and R Kruse

Solicitor for the Plaintiff:

Ashurst Australia

Counsel for the Defendants:

P W Collinson KC and J S Mereine

Solicitor for the Defendants:

HWL Ebsworth Lawyers

ORDERS

VID 773 of 2020

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

AND:

ISIGNTHIS LIMITED

First Defendant

NICKOLAS JOHN KARANTZIS

Second Defendant

ORDER MADE BY:	MCEVOY J
DATE OF ORDER:	8 AUGUST 2025

THE COURT ORDERS THAT:

1.Mr Nickolas John Karantzis be disqualified from managing corporations for a period of six years pursuant to ss 206C(1) and 206E(1) of the Corporations Act 2011 (Cth).

2.Mr Nickolas John Karantzis pay to the Commonwealth a pecuniary penalty of $1 million, within 30 days of the date of these orders, pursuant to s 1317G(1) of the Corporations Act in respect of his contraventions of ss 180(1), 674(2A) and 1309(2) and (12) of the Corporations Act identified in paragraphs 6 to 11 of the orders dated 26 July 2024.

3.Southern Cross Payments Ltd (formerly iSignthis Ltd) pay to the Commonwealth a pecuniary penalty of $10 million, within 30 days of the date of these orders, pursuant to s 1317G(1) of the Corporations Act in respect of the contraventions of s 674(2) of the Corporations Act identified in paragraphs 2 to 5 of the orders dated 26 July 2024.

4.In the absence of agreement as to the question of the costs of and incidental to the proceeding, on or before 4:00pm on 5 September 2025 the parties are to file and serve written submissions, not exceeding six pages on the question of costs (to be prepared with 1.5 line spacing and 12-point font).

5.If submissions are filed pursuant to paragraph 4 of these orders, on or before 4:00pm on 19 September 2025 the parties may file any responsive submissions to those filed by the other party on the question of costs, not exceeding three pages (to be prepared with 1.5 line spacing and 12-point font).

6.Any question of the costs of this proceeding will be determined on the papers pursuant to s 20A of the Federal Court of Australia Act 1976 (Cth).

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION	[1]
THE STATUTORY REGIME AND RELEVANT PRINCIPLES	[12]
Disqualification orders	[12]
Pecuniary penalties	[27]
General principles	[27]
Maximum penalties	[44]
ORDERS TO BE MADE AGAINST MR KARANTZIS	[48]
The nature of Mr Karantzis’ contraventions	[50]
The One-off Revenue Representation	[59]
One-off Revenue/Costs Information	[70]
Visa Termination Decision and the Reasons for Visa’s Termination	[74]
25 May 2020 letter to the ASX	[100]
Conclusion as to the nature and seriousness of Mr Karantzis’ contraventions	[105]
Does Mr Karantzis’ reliance on legal advice assist him?	[114]
Does the public require protection from Mr Karantzis?	[137]
Mr Karantzis’ relocation to Cyprus	[142]
Mr Karantzis’ character	[143]
The interests of shareholders	[160]
Is Mr Karantzis suitably contrite?	[179]
Did Mr Karantzis co-operate with ASIC?	[195]
Disqualification	[225]
Pecuniary Penalty	[244]
Maximum penalties	[249]
Course of conduct and totality principles	[255]
The appropriate pecuniary penalty to be ordered against Mr Karantzis	[261]
ORDERS TO BE MADE AGAINST ISIGNTHIS	[267]
The nature of iSignthis’ contraventions	[270]
One-off Revenue/Costs Information	[271]
Visa Termination Decision	[279]
Reasons for Visa’s Termination	[286]
Course of conduct and totality principles	[293]
The appropriate pecuniary penalty to be ordered against iSignthis	[296]
CONCLUSION	[314]
ANNEXURE A	[]

REASONS FOR JUDGMENT

MCEVOY J:

INTRODUCTION

1. On 21 June 2024 I delivered judgment on liability in this proceeding: Australian Securities and Investments Commission v iSignthis Limited [2024] FCA 669 (Liability Judgment). This judgment, which is concerned with questions of penalty, should be read together with the Liability Judgment. The abbreviations employed in the Liability Judgment are adopted here. 

2. For the reasons outlined in the Liability Judgment, I determined that iSignthis had engaged in conduct in contravention of ss 1041H and 674(2) of the Corporations Act 2001 (Cth), and that its former chief executive officer and managing director, Mr Nickolas John Karantzis, had contravened ss 180(1), 1309(2), 1309(12), and 674(2A) of the Act by reason of his involvement in iSignthis’ contravention of s 674(2).

3. On 26 July 2024, pursuant to s 1317E of the Act, I made declarations of contravention of civil penalty provisions by iSignthis and Mr Karantzis giving effect to the findings in the Liability Judgment. These may be summarised as follows:

   (a)iSignthis contravened s 674(2) of the Act:

   (i)for failing to notify the ASX of the One-off Revenue/Costs Information from 3 August 2018 until 15 November 2019 (Declaration 2);

   (ii)for failing to notify the ASX of the Visa Termination Decision from 12 May 2020 until 17 August 2020 (Declaration 3); and

   (iii)for failing to notify the ASX of the Reasons for Visa’s Termination from 12 May 2020 until 26 October 2020 (Declaration 4),

   and each of these contraventions was “serious” within the meaning of s 1317G(1)(b)(iii) of the Act (Declaration 5).

   (b)Mr Karantzis contravened:

   (i)s 180 of the Act:

   (A)in respect of his making the One-off Revenue Representation, and iSignthis’ contravention of s 1041H in relation to that representation (Declaration 6);

   (B)in respect of iSignthis’ contravention of 674(2) for failing to notify the ASX of the One-off Revenue/Costs Information (Declaration 8);

   (C)in respect of iSignthis’ contraventions of 674(2) for failing to notify the ASX of the Visa Termination Decision and the Reasons for Visa’s Termination (Declaration 9);

   (ii)s 674(2A) of the Act for his involvement in iSignthis’ contravention of s 674(2) in relation to the One-off Revenue/Costs Information (Declaration 7); and

   (iii)ss 1309(2) and (12) of the Act in relation to the 25 May 2020 letter to the ASX (Declaration 10),

   and each of these contraventions by Mr Karantzis was “serious” within the meaning of s 1317G(1)(b)(iii) of the Act (Declaration 11).

4. For convenience, the declarations and orders I made on 26 July 2025 are annexed to these reasons.

5. Regrettably the parties are significantly apart as to the penalties which should be imposed. ASIC seeks a disqualification order against Mr Karantzis and pecuniary penalty orders against iSignthis and Mr Karantzis. The orders sought by ASIC are in the following terms:

   (a)Mr Karantzis be disqualified from managing corporations for a period of ten years pursuant to ss 206C(1) and 206E(1) of the Act;

   (b)Mr Karantzis pay to the Commonwealth a pecuniary penalty of $1,500,000 pursuant to s 1317G(1) of the Act, in respect of his contraventions of s 180(1), s 674(2A) and ss 1309(2) and (12) of the Act identified in paragraphs 6 to 11 of the orders dated 26 July 2024; and

   (c)iSignthis pay to the Commonwealth a pecuniary penalty of $12,500,000 pursuant to s 1317G(1) of the Act, in respect of the contraventions of s 674(2) of the Act identified in paragraphs 1 [sic] (ASIC presumably intended to refer to paragraph 2) to 5 of the orders dated 26 July 2024.

6. ASIC relies on two affidavits of Mr Adam Anthony Boscoscuro, an employee of ASIC, sworn on 23 August 2024 and 4 October 2024.

7. ASIC also relies on written submissions dated:

   (a)15 November 2024, being a summary of the civil penalties awarded in relevant previous cases; 

   (b)12 December 2024, being written submissions on penalty (which are a version of submissions filed in advance of the penalty hearing, amended to incorporate references to the evidence given by Mr Karantzis at the penalty hearing); and

   (c)12 December 2024, being separate submissions on certain without prejudice correspondence adduced by the defendants on the question of penalty.

8. iSignthis and Mr Karantzis accept that in the circumstances they should be required to pay a modest pecuniary penalty, and submit that this would serve the objectives of general deterrence, specific deterrence, and protection of the public. They say that Mr Karantzis should be required to pay a pecuniary penalty of $250,000 and iSignthis should be required to pay a pecuniary penalty of $350,000. The defendants’ position is that it would not be appropriate for Mr Karantzis to be disqualified from managing corporations pursuant to ss 206C(1) and 206E(1) of the Act for any period of time at all, and that a disqualification order would be wholly inappropriate.

9. The defendants rely on the following affidavits:

   (a)the affidavit of Elizabeth Warrell sworn on 21 September 2021;

   (b)the affidavit of Mr Tod McGrouther sworn on 22 September 2024;

   (c)the affidavit of Mr Varghese Jojo Jose sworn on 23 September 2024;

   (d)the affidavit of Mr Nickolas John Karantzis sworn on 23 September 2024;

   (e)the affidavit of Mr Ajay Treon sworn on 23 September 2024;

   (f)the affidavits of Mr Anthony Seyfort sworn on 7 March 2023 and 23 September 2024;

   (g)the affidavit of Mr Christakis Taoushanis affirmed on 23 September 2024;

   (h)the affidavit of Mr Hongfu (Fred) Sun sworn on 23 September 2024;

   (i)the affidavit of Mr Justin Klintberg sworn on 23 September 2024;

   (j)the affidavit of Mr Peter Betyounan sworn on 23 September 2024;

   (k)the affidavit of Mr Peter Douglas Morton sworn on 23 September 2024;

   (l)the affidavit of Mr Panikos Pouros affirmed on 23 September 2024;

   (m)the affidavits of Mr Timothy Joseph Hart sworn on 21 September 2021, 7 March 2023 and 23 September 2024; and

   (n)the affidavit of Mr Todd Michael Richards sworn on 24 September 2024.

10. The defendants also rely on written submissions dated:

    (a)16 October 2024, being those filed in advance of the penalty hearing;

    (b)15 November 2024, being a competing summary of previous civil penalty cases; 

    (c)13 December 2024, being supplementary submissions on the evidence given by Mr Karantzis at the penalty hearing; and

    (d)13 December 2024, being their submissions on the issue of the without prejudice correspondence.

11. For the reasons that follow I have determined that iSignthis (now Southern Cross Payments Ltd) should be ordered to pay a pecuniary penalty of $10 million and that Mr Karantzis should be ordered to pay a pecuniary penalty of $1 million. I have also determined that Mr Karantzis should be disqualified from managing corporations for a period of six years.

    THE STATUTORY REGIME AND RELEVANT PRINCIPLES

    Disqualification orders

12. ASIC submits, and I accept, that having made five declarations that Mr Karantzis contravened the Act the court is empowered under any of ss 206C, 206E(1)(a)(i) or 206E(1)(a)(ii) of the Act to disqualify him from managing corporations for a period that the court considers appropriate if it is satisfied that the disqualification is justified. Section 206C of the Act is engaged in circumstances where the court has declared that Mr Karantzis contravened s 180 (a “corporation/scheme civil penalty provision”: ss 1317E(3), 1309(12)). Section 206E(1)(a)(ii) is engaged in circumstances where the court has declared that Mr Karantzis contravened the Act more than once. And s 206E(1)(a)(i) is engaged in circumstances where Mr Karantzis was an officer of iSignthis when it contravened the Act more than once, and on each occasion he failed to take reasonable steps to prevent the contravention (a conclusion which, I accept, necessarily arises from the conclusions that Mr Karantzis contravened s 180 by being involved in each of iSignthis’ contraventions).

13. I also accept ASIC’s submission that in determining whether any disqualification is justified, the court may have regard to Mr Karantzis’ conduct in relation to the management of any corporation as well as any other matters it considers to be appropriate: ss 206C(2), 206E(2) of the Act. The criteria relevant to the exercise of the court’s discretion is the same under each section: Australian Securities and Investments Commission v GetSwift Limited (Penalty Hearing) [2023] FCA 100 at [59] (Lee J) (ASIC v GetSwift). As Lee J observed in ASIC v GetSwift (at [59]), nothing therefore turns on whether a disqualification order is made under s 206C or s 206E.

14. ASIC submits that the following principles are relevant to the court’s consideration of a disqualification order in this case. I do not consider these principles to be controversial, and it is convenient to set them out here, supplemented where appropriate with relevant additional authority referred to by the defendants in their submissions.

15. First, the court has an established practice of considering the period of disqualification before considering whether any pecuniary penalty should be awarded, or the amount of that penalty: see Cruickshank v Australian Securities and Investments Commission (2022) 292 FCR 627 at [143] (Allsop CJ, Jackson and Anderson JJ) (Cruickshank v ASIC); Australian Securities and Investments Commission v Blue Star Helium Ltd (No 4) [2021] FCA 1578 at [74] (Banks-Smith J) (ASIC v Blue Star (No 4)). See also Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 (McHugh J) (Rich v ASIC). In an appropriate case the court may make a pecuniary penalty order in addition to a disqualification order, having regard to the purposes for which such orders are made: ASIC v GetSwift at [64]-[65].

16. Secondly, while the primary purpose of a pecuniary penalty is to act as a specific and general deterrent against repetition of like conduct, the primary aim of disqualification orders is the protection of the public from the harmful use of the corporate structure, or from use that is contrary to proper commercial standards: Cruickshank v ASIC at [144]; Australian Securities and Investments Commission v Adler [2002] NSWSC 483 at [56] (Santow J) (ASIC v Adler); ASIC v GetSwift at [61], [65]. Protection of the public also extends to protection of individuals who deal with companies, including consumers, creditors, shareholders and investors: Registrar of Aboriginal and Torres Strait Islander Corporations v Murray [2015] FCA 346 at [220] (Gordon J); ASIC v GetSwift at [61]. I accept however, as the defendants submit, that a disqualification order must not be excessive, and no one should be “sacrificed for the public interest”: Australian Securities and Investments Commission v Beekink [2007] FCAFC 7 at [113] (Mansfield, Jacobson and Siopis JJ), quoting Australian Securities and Investments Commission v Rich [2003] NSWSC 186 at [26]-[32] (Bryson J).

1. Thirdly, it is these different purposes of disqualification orders and pecuniary penalty orders that justify the long-standing practice of considering the imposition of a pecuniary penalty only after a disqualification order is considered: Cruickshank v ASIC at [144], citing Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 at [42] and [43] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ) (Pattinson). See also Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth) at [178] (Explanatory Memorandum).

2. Fourthly, the length of the period of disqualification and the seriousness of the contraventions in question are correlative: ASIC v GetSwift at [62]. In assessing an appropriate length of disqualification, consideration is to be given to the degree of seriousness of the contraventions, the propensity that the defendant may have to engage in similar conduct in the future, and the likely harm that may be caused to the public: ASIC v Adler at [56]. Importantly in the present circumstances, longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty and large financial losses.

3. Fifthly, a number of factors have been identified in the authorities as relevant to an assessment of the length of a period of disqualification, including the following:

   (a)whether the conduct was inadvertent or deliberate, especially where concerns have previously been raised with the director by the ASX: ASIC v Blue Star (No 4) at [85]-[87];

   (b)whether the conduct was “continued, knowing and wilful”: Australian Securities and Investments Commission v Healey (No 2) (2011) FCR 430 at [105] (Middleton J) (ASIC v Healey (No 2)), quoting ASIC v Adler at [56];

   (c)whether the director had acted dishonestly or appreciated that relevant announcements would mislead or deceive: see, for example, Australian Securities and Investments Commission v Vocation Ltd (in liq) (No 2) [2019] FCA 1783 at [50] (Nicholas J) (ASIC v Vocation Ltd (No 2));

   (d)whether the director has expressed any contrition or remorse: ASIC v Blue Star (No 4) at [97]. It is relevant to note in this regard that the Full Court in Volkswagen Aktiengesellschaft v Australian Competition and Consumer Commission (2021) 284 FCR 24 (Wigney, Beach and O’Bryan JJ) said as follows:

   … a contravener who has displayed no contrition or remorse, and no insight into their contravening conduct, would generally expect a higher penalty than would a contravener who has shown genuine contrition and remorse and good prospects of rehabilitation. That is because the requirement of specific deterrence is generally considered to be greater in the case of a contravener who has shown no contrition or insight into their offending behaviour.

   See also Mayfair Wealth Partners Pty Ltd v Australian Securities and Investments Commission (2022) 295 FCR 106 at [229]-[230] (Jagot, O’Bryan and Cheeseman JJ);

   (e)the experience and age of the director: ASIC v Vocation Ltd (No 2) at [58];

   (f)the relevance of false representations to the company's business: see, for example, Australian Securities and Investments Commission v Sino Australia Oil and Gas Ltd (in liq) [2016] FCA 1488 at [21] (Davies J) (ASIC v Sino);

   (g)whether the director was involved in drafting relevant announcements: ASIC v Blue Star (No 4) at [84]; and

   (h)the consequences of the contraventions committed by the director: ASIC v Healey (No 2) at [114].

4. Sixthly, and obviously enough, previous cases will only provide general guidance for determining a penalty or length of disqualification: see, for example, Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd [2021] FCA 1630 at [192] (Anderson J); ASIC v Healey (No 2) at [103]; Australian Securities and Investments Commission v Australia and New Zealand Banking Group Ltd (No 3) [2023] FCA 1565 at [47] (Moshinsky J) (ASIC v ANZ (No 3)). Nonetheless, certain factors evident in previous cases as justifying disqualification in a particular range were helpfully set out in ASIC v Adler by Santow J (at [56]). It will be necessary to return to his Honour’s analysis of the relevant factors in due course.

5. For their part the defendants refer also to the observations of Hargrave J in Australian Securities and Investments Commission v White [2006] VSC 239 (at [18]), where his Honour distilled McHugh J’s analysis in Rich v ASIC into the following four general categories of important matters to which courts have regard when determining whether to order disqualification and, if so, for what period:

   (a)the nature and seriousness of the contraventions;

   (b)the need for protection of the public;

   (c)retribution and deterrence; and

   (d)whether there are mitigating factors.

6. The defendants refer also in this regard to Commission for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 (Ekamper) where Franklyn J, in observations which have been influential, noted that in making a disqualification orders it is necessary to assess the:

   (a)character of the offenders;

   (b)nature of the breaches;

   (c)structure of the companies and the nature of their business;

   (d)interests of shareholders, creditors and employees;

   (e)risks to others from the continuation of offenders as company directors;

   (f)honesty and competence of offenders;

   (g)hardship to offenders and their personal and commercial interests; and

   (h)offenders’ appreciation that future breaches could result in future proceedings.

7. Seventhly, insofar as co-operation is concerned, ASIC submits and I accept that this can be a mitigating factor where it involves elements of contrition, or a willingness to accept responsibility and to facilitate the course of justice. It may also be a mitigating factor (but perhaps to a lesser degree) where it has spared the community the expense of a contested trial and enabled the resources of the regulator to be allocated to other investigations: see generally Construction, Forestry, Maritime, Mining and Energy Union v Fair Work Ombudsman (2023) 322 IR 233 (CFMMEU v Fair Work Ombudsman) at [67]-[93] (Rangiah J).

8. ASIC submits and I accept that a contravenor’s motivations for co-operating may also be relevant to determining whether there is to be any discount to the penalty to be imposed. For example, in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 (Mornington Inn), Stone and Buchanan JJ observed (at [76]):

   [A] discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.

9. ASIC also notes that in CFMMEU v Fair Work Ombudsman, Rangiah J observed that despite the High Court’s observations in Pattinson, co-operation in the absence of contrition may be mitigatory in three ways:

   (a)First, on the basis that although deterrence is the primary objective of a pecuniary penalty, other well-known factors have been identified as bearing upon (albeit to a lesser degree) the court’s assessment of the penalty: at [85]-[88].

   (b)Secondly, the general deterrence objective of pecuniary penalties could be achieved, at least indirectly, if cooperation results in freeing up resources of a regulator to enable investigation of other matters: at [89]; see also Australian Securities and Investments Commission v MLC Limited [2023] FCA 539 at [88] (Moshinsky J).

   (c)Thirdly, in any event, the High Court in Pattinson had refused special leave from the Full Court’s finding that the primary judge had erred by not giving any discount on penalty by reason of the contravenor’s admissions and cooperation, which rendered the trial in that case unnecessary: at [92]. This part of the Full Court’s decision in Pattinson (see, in particular, [119]-[120]) therefore remains undisturbed.

10. Eighthly, it should be emphasised that the criminal law principles of totality, course of conduct and parity also inform the court’s consideration of disqualification. When determining the disqualification period to be imposed for multiple contraventions, the court should impose a disqualification period for each individual contravention and then take into account the totality principle to adjust that period to arrive at a total effective disqualification: ASIC v Healey (No 2) at [130]; see also ASIC v GetSwift at [90].

    Pecuniary penalties

    General principles

11. ASIC submits and I accept that having made declarations both of contravention under s 1317E and “seriousness” within the meaning of s 1317G(1)(b)(iii) of the Act, the court has power under s 1317G(1) of the Act to impose pecuniary penalties in respect of the contraventions.

12. As is well known the relevant underlying principles have been expressed in various ways, most recently and authoritatively by the High Court in Pattinson. That case concerned s 546 of the Fair Work Act 2009 (Cth), but what the High Court there said has been repeatedly applied to the civil penalty regime in the Act: see, for example, ASIC v GetSwift at [34]-[48]; Australian Securities and Investments Commission v Mercer Financial Advice (Australia) Pty Ltd [2023] FCA 1453 at [62]-[80] (McEvoy J) (ASIC v Mercer).

13. ASIC submits and I accept that the fundamental principles can be summarised as follows (supplemented as appropriate by particular expressions of principle referred to by the defendants in their submissions). 

14. First, the power to impose a penalty is to be exercised judicially, that is, fairly and reasonably: Pattinson at [40].

15. Secondly, the primary or sole purpose of civil penalties is the promotion of the public interest in compliance with the relevant regulatory regime by deterrence, both specific and general: Pattinson at [9]-[10], [15].

16. Thirdly, the penalty must be “proportionate” and “appropriate” in the sense that it strikes a reasonable balance between oppressive severity and deterrence in the circumstances of the case: Pattinson at [40]-[41], [46]; ASIC v Mercer at [65]. While the penalty should not be so high that it is oppressive, it should not be so low as to be regarded by the contravener as “an acceptable cost of doing business”: Pattinson at [17], [40]-[41]. Even if there is no indication that a defendant will contravene a civil penalty provision in the proximate future, a penalty must be imposed which will act as a reminder to that defendant and the community of the consequences of the contraventions, and this can be the most significant factor in determining penalty in particular cases: Australian Securities and Investments Commission v Lanterne Fund Services Pty Ltd [2024] FCA 353 at [117] (McEvoy J) (ASIC v Lanterne), citing Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [204] (Middleton J) (ASIC v Telstra).

17. Fourthly, the court should have regard to the prescribed maximum penalty, and there should be some reasonable relationship between the maximum penalty and that imposed: Pattinson at [10], [53]; ASIC v Mercer at [68]. This relationship will be established where the penalty does not exceed what is reasonably necessary to deter future contraventions of a like kind by the contravenor and by others. This means that the court should not simply start with the maximum penalty and proceed by making proportional deductions to that amount. The maximum penalty is also not reserved for only the most serious examples.

18. Fifthly, s 1317G(6) of the Act requires the court to take into account the following factors for conduct occurring after 13 March 2019 following the enactment of the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act2019 (Cth) (Treasury Laws Amendment Act), noting that for conduct occurring before s 1317G(6) came into effect, that these factors were already relevant considerations: ASIC v Mercer at [76]:

    (a)the nature and extent of the contravention;

    (b)the nature and extent of any loss or damage suffered because of the contravention;

    (c)the circumstances in which the contravention took place; and

    (d)whether the person has previously been found by a court (including a court in a foreign country) to have engaged in similar conduct.

19. Sixthly, additional factors may be taken into account as relevant considerations, insofar as they inform the penalty necessary to secure the objects of deterrence: ASIC v GetSwift at [40]. However, they are not to be applied as a “rigid catalogue”, and as the defendants submit, the court should weigh all relevant circumstances: Pattinson at [18]-[19], [46]-[48]; ASIC v Mercer at [69]-[72]; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 at [101] (Dowsett, Greenwood and Wigney JJ). The defendants refer in this regard to Australian Securities and Investments Commission v Austal [2022] FCA 1231 at [82]-[95] (O’Bryan J) (ASIC v Austal) and Australian Securities and Investments Commission v Mitchell (No 3) [2020] FCA 1604 at [41] (Beach J) (ASIC v Mitchell (No 3)), where relatively modest pecuniary penalties were imposed in all of the circumstances.

20. The courts have adopted from criminal sentencing practice (see Markarian v The Queen (2005) 228 CLR 357 at [51] (McHugh J)) the notion of an intuitive or “instinctive synthesis”, which involves the identification and balancing of all the factors relevant to the contravention and the contravener, and the making of a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty: ASIC v Mitchell (No 3) at [40]; Australian Securities and Investments Commission v Forex Capital Trading Pty Ltd [2021] FCA 570 at [105] (Middleton J). Various lists of relevant factors have been proposed in the cases, but in Australian Securities and Investments Commission v Westpac Banking Corporation (No 3) [2018] FCA 1701 at [49] (ASIC v Westpac (No 3)), Beach J listed the following factors which his Honour considered were to be taken into account:

    (a)the extent to which the contravention was the result of deliberate or reckless conduct by the corporation, as opposed to negligence or carelessness;

    (b)the number of contraventions, the length of the period over which the contraventions occurred, and whether the contraventions comprised isolated conduct or were systematic;

    (c)the seniority of the officers responsible for the contravention;

    (d)the capacity of the defendant to pay, but only in the sense that whilst the size of a corporation does not of itself justify a higher penalty than might otherwise be imposed, it may be relevant in determining the size of the pecuniary penalty that would operate as an effective specific deterrent;

    (e)the existence within the corporation of compliance systems, including provisions for and evidence of education and internal enforcement of such systems;

    (f)remedial and disciplinary steps taken after the contravention and directed to putting in place a compliance system or improving existing systems and disciplining officers responsible for the contravention;

    (g)whether the directors of the corporation were aware of the relevant facts and, if not, what processes were in place at the time or put in place after the contravention to ensure their awareness of such facts in the future;

    (h)any change in the composition of the board or senior managers since the contravention;

    (i)the degree of the corporation’s co-operation with the regulator, including any admission of an actual or attempted contravention;

    (j)the impact or consequences of the contravention on the market or innocent third parties;

    (k)the extent of any profit or benefit derived as a result of the contravention; and

    (l)whether the corporation has been found to have engaged in similar conduct in the past.

21. Seventhly, the capacity of the defendant to pay may be relevant when assessing whether a penalty would operate as a specific deterrent (see ASIC v Lanterne at [194]), but it is less important and less relevant than the objective of general deterrence itself: Australian Securities and Investments Commission v Holista Colltech Ltd [2024] FCA 244 at [132] (SC Derrington J) (ASIC v Holista Colltech). Even if the imposition of a penalty is likely to cause a company to become insolvent, or if the company is already in liquidation, it may be appropriate to impose a penalty as a measure of the seriousness of the contravention and for general deterrence: ASIC v GetSwift at [43]; Australian Securities and Investments Commission v Select AFSL Pty Ltd (No 3) [2023] FCA 723 at [119] (Abraham J) (ASIC v Select AFSL (No 3)); Australian Securities and Investments Commission v AGM Markets Pty Ltd (In Liq) (No 4) [2020] FCA 1499 at [35] (Beach J). In Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [2011] FCA 372 at [54], Gordon J observed:

    However, as deterrence is the primary objective of penalties, the financial capacity of a respondent to pay must not prevent the Court from doing its duty even if in some cases, the penalty is so high that the offender will become insolvent. Put another way, I accept that capacity to pay is a relevant factor, but one of “less importance when balanced against the necessity of imposing a penalty that satisfies the objective of general deterrence”.

    (Citations omitted.)

22. The court is also to consider the size and capacity of the company to pay as at the date of the contravention (see ASIC v Holista Colltech at [136]), and whether assets of the company have been removed from its hands at a time when exposure to a pecuniary penalty and a costs order was a real possibility: ASIC v Select AFSL (No 3) at [118]-[119].

23. Eighthly, as has been mentioned in relation to disqualification orders, criminal law principles of totality, course of conduct and parity also inform the court’s determination of a penalty: Pattinson at [45]-[46]; ASIC v Mercer at [69]-[70], [80]; ASIC v GetSwift at [44]-[47].

24. Insofar as totality is concerned, as with disqualification orders the court is to look at the entirety of the offending and determine the most appropriate penalty for all the offences taken together: ASIC v Mercer at [70]; ASIC v GetSwift at [46]; ASIC v Westpac (No 3) at [162]. Where the totality principle is applicable, the general approach adopted by the court with respect to pecuniary penalties has been to determine the appropriate pecuniary penalty for each contravention and to apply a discount to the aggregate amount: ASIC v Healey (No 2) at [129]. 

25. As to the course of conduct principle, the court is to consider whether multiple contraventions arise out of the same course of conduct or a single transaction, and calibrate the penalty for each contravention to avoid double punishment: Pattinson at [45]; ASIC v Mercer at [80]; ASIC v GetSwift at [45]. See also, in this regard, the observations of Beach J in Australian Competition and Consumer Commission v Murray Goulburn Co-Operative Co Ltd [2018] FCA 1964 at [29] (ASIC v Murray Goulburn) and ASIC v Mitchell (No 3) at [43]-[44] as to “multi-faceted courses of conduct”. This principle does not, however, permit the court to impose a single penalty in respect of multiple related contraventions: Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 2147 at [268] (Wigney J).

26. On the subject of parity, each case must turn on its own facts, but predictability of outcomes (for comparable contraventions) is capable of assisting in the assessment of general deterrence: ASIC v Mercer at [69]; ASIC v GetSwift at [47].

1. Ninthly, when assessing continuing contraventions, s 1317QA of the Act provides (for contraventions occurring after 13 March 2019) that a person who contravenes a civil penalty provision that requires an act or thing to be done before a particular time commits a separate contravention of that provision each day during which the contravention occurs. In Australian Securities and Investments Commission v Noumi Ltd [2024] FCA 862 at [50] (ASIC v Noumi), Jackman J observed that for a contravention of s 674(2) (and by parity of reasoning s 674(2A)), s 1317QA has the effect that a separate contravention occurs on each trading day in the relevant period of non-disclosure. The arithmetic maximum penalty must therefore be taken to be the aggregate of those contraventions, but this must be balanced against the course of conduct and totality principles referred to above: ASIC v Noumi at [69]-[73].

   Maximum penalties

2. ASIC submits, correctly, that the contravening conduct committed by iSignthis and Mr Karantzis occurred over a period from around July or August 2018 until around October 2020. On 13 March 2019, the Treasury Laws Amendment Act amended the civil penalty provisions in the Act by increasing the maximum pecuniary penalties applicable to contraventions of civil penalty provisions and fixing those maximums to the value of a penalty unit. The amendments apply in relation to contraventions where the “conduct constituting the contravention” occurred wholly on or after 13 March 2019: s 1657 of the Act.

3. ASIC submits and I accept that the maximum applicable pecuniary penalties calculated pursuant to s 1317G(3)-(4) of the Act during the period of contravening conduct were as follows:

   (a)from May 2018 to 12 March 2019:

   (i)$200,000 for Mr Karantzis; and

   (ii)$1,000,000 for iSignthis;

   (b)from 13 March 2019 until 30 June 2020:

   (i)$1,050,000 for Mr Karantzis; and

   (ii)$10,500,000 for iSignthis;

   (c)from 30 June 2020 until commencement of the proceedings:

   (i)$1,110,000 for Mr Karantzis; and

   (ii)$11,100,000 for iSignthis.

4. ASIC also submits and I accept that in relation to the contraventions of ss 674(2) and 674(2A) of the Act, by operation of s 1317QA, separate contraventions of s 674(2) and (2A) were committed by iSignthis and Mr Karantzis each trading day during the relevant period of contravening conduct. Therefore, where those contraventions were continuing on and from 13 March 2019 and 30 June 2020, respectively, the higher maximum penalty is applicable. ASIC also submits, and I accept, that s 1657 of the Act does not bar the application of the 2019 amendments to these contraventions because, by s 1317QA of the Act, the relevant “conduct constituting the contravention” within the meaning of s 1657 re-occurs, and a separate (and whole) contravention is committed each trading day. I accept that this approach is consistent with that adopted by Wigney J in Australian Securities and Investments Commission v Macquarie Bank Limited [2024] FCA 416 at [10], [39], [69], [80], [92], where his Honour applied the post-13 March 2019 penalty regime to contraventions by the Macquarie Bank of s 912A(1)(a) of the Act where those contraventions had commenced in 2016 and were continuing as at 13 March 2019 (and into 2020).

5. Having regard to these statutory provisions and the applicable principles, I turn to consider what orders should be made against Mr Karantzis and iSignthis.

   ORDERS TO BE MADE AGAINST MR KARANTZIS

6. While correctly acknowledging that previous cases may only provide general guidance, the parties have not identified any recent similar or analogous cases which they consider provide suitable guidance to the determination and the length of any period of disqualification from managing corporations, or the calculation of penalty in this case. To the extent that the defendants have referred to various cases which they submit support the imposition of a relatively minor sanction, I am not satisfied that these cases provide meaningful guidance in the present circumstances.

7. What follows therefore is a consideration of Mr Karantzis’ contraventions, together with an assessment of the mitigating factors relied upon by the defendants in support of their position that nothing more than a modest pecuniary penalty should be imposed on Mr Karantzis. While I acknowledge the differences between the remedial responses of disqualification and penalty noted above, it is convenient to traverse mitigating factors as relevant to both enquiries together before returning to a separate consideration of each penalty.

   The nature of Mr Karantzis’ contraventions

8. Consistently with the way this litigation has been conducted from the outset, there is significant disagreement between the parties as to the way the conduct of Mr Karantzis is to be characterised for the purposes of determining the penalty to be ordered against him.

9. ASIC’s position is that that the court can be satisfied that Mr Karantzis’ contraventions are in the mid-to-upper range of offending, and this is why a disqualification order of ten years is justified and appropriate. ASIC advances several reasons for this, including the following. First, it is said that Mr Karantzis was effectively the guiding mind of iSignthis. He was closely involved in and bears responsibility under ss 180 and (or alternatively) 674(2A) of the Act for each of the contraventions, and was directly responsible for contravening ss 1309(2) and (12).

10. Secondly, ASIC submits that Mr Karantzis’ contraventions concerned matters that were material and central to iSignthis’ business. The contraventions concerned issues of particular to concern to the market, Mr Karantzis well knew this, and each of the contraventions had the effect of misleading the market and the market operator. This, ASIC submits, had a tendency to undermine confidence in the market and its integrity and efficiency.

11. Thirdly, ASIC submits that Mr Karantzis knew of his and iSignthis’ obligations under the Act, and he knew of the materiality of the information he misrepresented or withheld.

12. Fourthly, ASIC submits that Mr Karantzis’ contraventions demonstrate that he is a serious and continuing risk to the public and the public needs to be protected from him, notwithstanding his relocation to Cyprus.

13. Fifthly, ASIC submits that Mr Karantzis’ conduct occurred and continued over a significant period of time, extending from 2018 until late 2020, including during ASIC’s investigation into iSignthis and its directors. This, it is said, underscores the seriousness of the offending, an absence of contrition and insight, and a disregard for the regulatory framework.

14. Sixthly, ASIC submits that it is significant that the non-disclosure contraventions concerning the Visa Termination Decision and the Reasons for Visa’s Termination occurred after the ASX had sent its letter to iSignthis of 7 May 2020 asking questions about what was happening with Visa, and that these contraventions were continuing when the ASX sent its further query letter on 5 August 2020.

15. The defendants’ position is that the contraventions found to have been proven by ASIC are in stark contrast to the serious allegations which underpinned ASIC’s Performance Shares case. It is, the defendants submit, inappropriate and disproportionate to contemplate a disqualification order where there has been no finding that Mr Karantzis acted dishonestly in relation to any of the contraventions which were proven and when mitigating factors are considered. On the whole, the defendants’ submissions seek, somewhat unsatisfactorily, to minimise the seriousness of Mr Karantzis’ contraventions.

16. Before turning to the relevant contraventions, I record my acceptance of ASIC’s submission that Mr Karantzis was in every sense the guiding mind of iSignthis. Mr Karantzis closely managed and guided the strategic direction of the company, he was the spokesperson and public face of the company, and he was involved in preparing and directing the announcements, reports and publications of the company. Other than drawing attention to Mr Karantzis’ reliance on others during the periods relevant to his contravening conduct, the defendants do not contend otherwise. This reality must be kept front of mind in considering each of the relevant contraventions and the parties’ competing positions in relation to them.

    The One-off Revenue Representation

17. Mr Karantzis contravened s 180 of the Act in respect of his making of the One-off Revenue Representation, and in respect of iSignthis’ contravention of s 1041H of the Act in making that representation (Declaration 6). This was a serious contravention (Declaration 11).

18. ASIC submits that the seriousness of this contravention is supported by the following findings in the Liability Judgment:

    (a)the Analyst Briefing was conducted in circumstances where previous disclosures and reports made by the company had generated a narrative of a startup company building recurring transactional (or “settlement”) revenue through the processing of GPTV from integrated clients (Liability Judgment at [113]-[114], see also, importantly, [154]);

    (b)these reports and announcements were followed and reported upon by Mr Jacobs of Patersons (Liability Judgment at [115], see also [154]), and as a result Mr Jacobs formed the view, which was directly confirmed by Mr Karantzis, that the revenue generated in the June 2018 quarter was recurring revenue (Liability Judgment at [116]-[117], see also [154]);

    (c)Mr Karantzis invited, received and engaged with questions in advance of the Analyst Briefing as to the proportion of revenue in the June quarter that was recurring (Liability Judgment at [118], [163(c)], see also, importantly, [154] and [173]);

    (d)Mr Karantzis was involved in drafting the written Analyst Brief (Liability Judgment at [163(d)], see also [173]);

    (e)the misrepresentation made at the Analyst Briefing was directed to market analysts and market investors (Liability Judgment at [125], see also [154]);

    (f)the question directed to Mr Karantzis at the Analyst Briefing which prompted the misrepresentation was “unambiguously clear” and the answer was similarly “a clear representation that the percentage of revenue in the fourth quarter to 30 June 2018 from one-off integration fees was less than 15 per cent” (Liability Judgment at [154]);

    (g)Mr Karantzis knew in advance of the Analyst Briefing that a question on that topic was coming (Liability Judgment at [163(e)], see also [173]);

    (h)Mr Karantzis knew that the question and its answer was of interest and importance to the market (Liability Judgment [174], see also, importantly, [176]);

    (i)there was no suggestion that Mr Karantzis misunderstood the question or misspoke, and the defendants gave no explanation for why he gave the answer he did (Liability Judgment at [163(g)], see also [173]);

    (j)there is no suggestion that Mr Karantzis did not know the answer to the question, or the true financial position in the June quarter (Liability Judgment at [163(g), (h)], see also [173]);

    (k)the misrepresentation was picked up and re-published by Mr Jacobs to other investors and potential investors (Liability Judgment at [136]);

    (l)the misrepresentation had a material effect on the price of iSignthis’ shares, by perpetuating the market’s incorrect understanding of the proportion of recurring revenue, and caused harm to the market (Liability Judgment at [177]-[178]);

    (m)Mr Karantzis failed to correct the misrepresentation, which became more egregious on 7 August 2018 when he received Mr Jacobs' research note reporting on the Analyst Briefing and repeating the misrepresentation (Liability Judgment at [163(i), (j)], see also [173]); and

    (n)the failure to correct the misrepresentation continued until 15 November 2019, which is more than 15 months (Liability Judgment at [163(k)], see also [173]).

19. As ASIC submits, having regard to these matters in the Liability Judgment the court found that Mr Karantzis was “obliged not to mislead the market on a matter which he knew was of interest and importance to the market” and that by doing so he “committed a serious breach of the normative standard of honesty of conduct required by s 180(1) of the Act and on which market efficiency rests” (Liability Judgment at [176]).

20. ASIC also draws attention to the finding in the Liability Judgment that in relation to the One-off Revenue Representation, Mr Karantzis not only failed in the duty required by s 180(1) of the Act but “either knowingly misrepresented facts or intentionally or recklessly acted to prevent the truth from being disclosed” (Liability Judgment at [174]). The defendants submit, however, that in the particular context of a penalty hearing this finding ought not to be characterised as a finding of deliberate wrongdoing by Mr Karantzis in circumstances where ASIC brought a confined case alleging no more than a failure by Mr Karantzis to discharge his duties with appropriate care and diligence. Rather, the defendants submit that the reference to Mr Karantzis having “recklessly acted” to prevent the truth from being disclosed should be understood as no more than an “elevated form of negligence” or “gross carelessness” in this respect (referring to the observations of Gummow, Hayne and Heydon JJ as to the various uses of “reckless” as a criterion of legal liability in Banditt v The Queen (2005) 224 CLR 623 at [1]-[2]). The defendants submit that the reference to recklessness should not in any sense be regarded as a finding of dishonesty or deceit on the part of Mr Karantzis in making the One-off Revenue Representation.

21. Accordingly, the defendants submit that the finding in the Liability Judgment (at [174]) should not be read as a finding that Mr Karantzis was aware that the market had been misled from the time the misstatement was made, in August 2018, until the statement was corrected some 15 months later. This, the defendants maintain, would amount to a finding that Mr Karantzis’ conduct in making the misstatement was deceitful, and this would not be justified having regard to the way ASIC put its case.

22. I accept the defendants’ submission that the findings in the Liability Judgment with regard to the One-off Revenue Representation, and in particular the use of the expression “recklessly acted” (at [174]), should not be understood as amounting to a finding that Mr Karantzis engaged in conduct which intentionally or dishonestly sought to mislead.

23. The defendants adduced evidence in the penalty hearing from Mr Karantzis that he was not aware that the market had been misled by his misstatement at the Analyst Briefing, and that he does not recall reading Mr Jacobs’ research note which was sent to him on 7 August 2018 as he relied on other people to read material of this kind. Mr Richards, the company secretary, gives evidence that he had no independent recollection of the question which was asked by Mr Davies at the Analyst Briefing or the answer given by Mr Karantzis. It was also Mr Richards’ evidence that he has no memory of speaking to Mr Karantzis after the Analyst Briefing about the question, and that he considered he would recollect such a conversation if it occurred. I accept that this evidence may be inconsistent with any intention on the part of Mr Karantzis to mislead the market and that in circumstances where ASIC was alleging that Mr Karantzis’ conduct was dishonest, it was open for this evidence to be led at the penalty hearing.

24. As the defendants submit, ASIC brought a case that iSignthis contravened s 1041H of the Act and that Mr Karantzis failed to discharge his duties with appropriate care and diligence in breach of s 180 of the Act. The proceeding was conducted by both parties on that basis. I accept that ASIC’s allegation was that Mr Karantzis had particular knowledge that the One-off Revenue Representation was false, or ought to have had that knowledge, and either was said by ASIC to be sufficient to amount to a breach of s 180 of the Act. ASIC succeeded on the second limb of this case (Liability Judgment at [180]).

25. Nonetheless, to the extent that the defendants maintain a submission that Mr Karantzis’ conduct which was the subject of the One-off Revenue Representation was nothing more than a careless mistake, and could not therefore be regarded as serious, I do not accept that this is so. Indeed, the finding in the Liability Judgment was to the contrary (at [174]). Nor am I persuaded, as the defendants submit, that the One-off Revenue Representation can properly be characterised as no more than a failure by Mr Karantzis to exercise care and diligence on a single occasion when particular words were spoken in response to a question. On any view it was more than this.

26. Although the finding in the Liability Judgment was not, and should not be taken to be, that Mr Karantzis was intentionally dishonest, it remains that Mr Karantzis knew that the question which was asked and the answer he gave which is the subject of this contravention was of interest and importance to the market. Mr Karantzis ought to have known that the market would be misled by a misstatement by him, and it was reckless, in the sense that it was “grossly careless” (to use the language of senior counsel for the defendants), for him to have acted as he did. I accept therefore, as ASIC submits, that nothing in Mr Karantzis’ evidence about the One-off Revenue Representation (and the One-off Revenue/Costs Information) casts doubt upon these particular findings in the Liability Judgment. These are serious matters.

27. In circumstances where it was a conclusion in the Liability Judgment that Mr Karantzis received a copy of Mr Jacobs’ research note (Liability Judgment at [163(i),(j)], [173]), I am satisfied that Mr Karantzis had, at the very least, constructive knowledge that a correction of his statement at the Analyst Briefing was required. The evidence relied upon by the defendants at the penalty hearing as to Mr Karantzis’ actual state of mind does not affect the finding at [174] of the Liability Judgment as to the seriousness of Mr Karantzis’ recklessness or, to use the defendants’ language, “gross carelessness”. As the defendants themselves acknowledge, in circumstances where Mr Karantzis’ usual practice was to use trading volumes and share prices to alert him to information which had been released to the market, one might reasonably think that the absence of share price movement would have alerted him to the fact that the market had been misled.

    One-off Revenue/Costs Information

28. Mr Karantzis contravened ss 180 and 674(2A) of the Act in respect of iSignthis’ contravention of s 674(2) by failing to notify the ASX of the One-off Revenue/Costs Information (Declarations 7 and 8). These were serious contraventions (Declaration 11).

29. The Liability Judgment concluded that insofar as the contravention of s 674(2A) is concerned Mr Karantzis “intentionally participated in the relevant conduct” by reason of “his actual knowledge of the essential elements constituting the contravention” (Liability Judgment at [294]). Mr Karantzis was well aware of the significance of the One-off Revenue/Costs Information to the market, that it was not generally available, and that had it been generally available it would have had a material effect on the price or value of iSignthis’ shares (Liability Judgment at [199]-[201], [265], [282]-[285], [294]). Also, as has been mentioned, Mr Karantzis was in direct communications with investors and analysts before and during the Analyst Briefing about the proportion of one-off and recurring revenue in the 30 June 2018 quarter. It is reasonable to think that he had an even greater knowledge of the importance of the information to the market than other directors of iSignthis (Liability Judgment at [284]).

30. The defendants’ position is that ASIC succeeded in this contravention only from 3 August 2018, that being the date on which of the One-off Revenue Representation was made at the Analyst Briefing. The defendants submit, therefore, that Mr Karantzis’ conduct the subject of the One-off Revenue/Costs contravention is indistinguishable from his conduct which is the subject of the One-off Revenue Representation contravention. There is, the defendants maintain, no additional content in this contravention from the perspective of penalty.

1. While I accept the defendants’ submission that the One-off Revenue Representation and One-off Revenue Costs Information contraventions arise from the one event (that is, the representation on 3 August 2018), I do not accept the defendants’ submission that Mr Karantzis’ conduct in relation to the One-off Revenue Costs Information can effectively be ignored in the court’s consideration of penalty. The One-off Revenue Costs Information contravention involved misleading the ASX, as well as the market. It will be necessary to return to a consideration of the course of conduct principle as applicable to these contraventions.

   Visa Termination Decision and the Reasons for Visa’s Termination

2. Mr Karantzis also contravened s 180 of the Act in respect of iSignthis’ contraventions of 674(2) of the Act for failing to notify the ASX of the Visa Termination Decision and the Reasons for Visa’s Termination (Declaration 9). This was a serious contravention (Declaration 11).

3. In relation to the non-disclosure of the Visa Termination Decision and the Reasons for Visa’s Termination (the Visa information) to the ASX, ASIC succeeded in respect of the period from 12 May 2020 to 17 August 2020 (with respect to the Visa Termination Decision) and 12 May 2020 until 26 October 2020 (with respect to the Reasons for Visa’s Termination). However, as the defendants emphasise, ASIC did not prove its case in respect of the period between 17 April 2020 to 12 May 2020. During this period the court found that iSignthis was entitled to rely on the incomplete negotiation exception in Listing Rule 3.1A (Liability Judgment at [336]-[343]).

4. I accept ASIC’s submission that it is significant that the non-disclosure of the Visa information occurred after the ASX had sent its letter to iSignthis of 7 May 2020 pursuant to Listing Rule 18.7, asking questions about the fact that iSeM had been listed as “SUSPENDED BY AML” on Visa’s Global Registry of Service Providers. I also accept ASIC’s submission that it is significant that these contraventions were continuing even when the ASX sent a further query letter on 5 August 2020, specifically seeking explanations from iSignthis as to why it had not disclosed the relevant information. Although the 5 August 2020 letter prompted iSignthis and Mr Karantzis to acknowledge on 17 August 2020 that Visa had terminated the relationship with iSignthis and iSeM, albeit in what were found to be less than expansive and tendentious terms (Liability Judgment at [566]), ASIC is correct to submit that the Reasons for Visa’s Termination were never disclosed (Liability Judgment at [375] and [460]).

5. While ostensibly acknowledging the seriousness of Mr Karantzis’ conduct in relation to the non-disclosure of the Visa information, the defendants submit that there are a number of mitigating factors which explain that conduct and which should affect the court’s determination of penalty.

6. The first is that at all times other than between 12 and 21 May 2020, Mr Karantzis acted in accordance with the legal advice of Mr Andrew Seyfort, a senior and experienced external corporate legal practitioner. Relatedly, the defendants submit that after 24 May 2020 Mr Karantzis relied on advice in two reports which were prepared by Clayton Utz. I will deal separately with the relevance of Mr Karantzis’ asserted reliance on the company’s external legal advice, and whether weight should be given to this in assessing penalty.

7. Of particular relevance to the non-disclosure of the Visa information, however, the defendants submit that between 12 and 21 May 2020 Mr Karantzis was acting partly in accordance with advice he received from the Cyprus based directors of iSignthis that it was in the best interests of the company to notify the regulator, the CBC, of Visa’s decision prior to the ASX. The defendants submit that during this period the board of iSignthis and Mr Karantzis had intended to notify the ASX following notification to the CBC, and that there were therefore sound commercial reasons for delaying the notification to the ASX.  

8. The defendants make lengthy and detailed submissions on this issue, which is said to be relevant both to disqualification and to pecuniary penalty. They draw attention in particular to the finding in the Liability Judgment (at [459]) that “it would seem that on 13 May 2020 Mr Karantzis had no intention to make disclosure to the CBC or the ASX, but was continuing to communicate with Visa seeking further concessions”. Relying on observations of Dixon J (as his Honour then was) in Blairv Curran (1939) 62 CLR 464 (at 531-533), the defendants submit that these findings should be regarded as “non-essential” or “subsidiary” to the conclusion that the obligation to advise the CBC was no defence to the case that iSignthis was in breach of its continuous disclosure obligations. Thus the defendants submit that it is not accurate to conclude as the Liability Judgment did (at [459]) that “iSignthis’ communications with the CBC did not occur until after the CBC’s email of 15 May 2020 asking for an explanation of the present state of affairs.” That is, that the relevant intention to notify the CBC only came about when the CBC communication of 15 May 2020 arrived. In this regard the defendants rely on the evidence of Ms Elizabeth Warrell (the chief financial officer and company secretary), Mr Hart (the non-executive chairman) and Mr Seyfort.

9. Before turning to consider the defendants’ submissions on this point, however, it should be noted that any mitigation which might be available in this regard would be relevant only to the short period between 12 and 21 May 2020. This point does not assist the defendants in relation to Mr Karantzis’ conduct between 21 May and 17 August 2020 (with respect to the Visa Termination Decision) and 21 May 2020 and 26 October 2020 (with respect to the Reasons for Visa’s Termination).

10. In relation to iSignthis’ communications with the CBC, the defendants rely on evidence given by Ms Warrell that:

    (a)on the morning of 13 May 2020, she and Mr Karantzis agreed that it would be more appropriate to speak to the CBC before notifying the market of the Visa Termination Decision given that there were already announcements in the market about Visa, and because shares in iSignthis had been suspended from trading; and

    (b)iSignthis was not waiting for a response from Visa before informing the CBC and the email from the CBC on 15 May 2020 was not the prompt to draft a notification.

11. The defendants submit that the evidence of Mr Hart and Mr Seyfort is also to the effect that it was understood by them, Ms Warrell and Mr Karantzis that the CBC would be informed as to the status of iSignthis’ relationship with Visa before the ASX and the market were notified. They submit that Mr Christakis and Dr Theocharides had both informed the board of iSignthis that the CBC needed to be notified of what was happening with Visa, or the licence would be put at risk.

12. The defendants submit that although iSignthis’ decision making with regard to the CBC does not excuse the contraventions of the Act, it bears upon penalty because it explains why Mr Karantzis (and others within iSignthis) did not work towards disclosing the Visa information to the market before 21 May 2020. The defendants submit again, as they did during the liability trial, that it is difficult to conceive that a chief executive officer in the position of Mr Karantzis would risk the business of the company rather than follow the advice he and the company were receiving to inform the CBC before making a market announcement in Australia.

13. The defendants submit that it is in this context of the changed landscape after 12 May 2020, and also the communications between iSignthis and the CBC until 21 May 2020, that both the letter to shareholders and the responses to the 7 May query letter were prepared with the intention that they be released together.  It is said that the contraventions which were found to have occurred in relation to the non-disclosure of the Visa information arise from the same factual matrix as the contraventions that were found in relation to the 7 May query letter.

14. The defendants submit that if the letter to shareholders had disclosed the Visa information, then as at 24 May 2020:

    (a)the market would have been informed about those matters;

    (b)the questions in the 7 May query letter would have been superseded; and

    (c)the ASX would have had additional underlying information such that the responses provided on 24 May 2020, in their terms and in that context, could not have been false or misleading.

15. In these circumstances the defendants submit that iSignthis’ contravention would have been confined to s 674 of the Act, and for a period of 14 days (eight business days), during which shares were suspended from trading. The defendants submit therefore that in determining the appropriate penalty the circumstances which explain why the letter to shareholders did not ultimately achieve this intended outcome are relevant because they affect the nature of the contravention and are also mitigating factors which ought to be taken into account in determining penalty. The defendants submit that if it is accepted that the operative delay was only 14 days, this is analogous to the factual circumstances of ASIC v Austal in which a delay of 14 days (ten business days) in making proper disclosure resulted in only a modest penalty being imposed upon the relevant director.

16. Mr Karantzis concedes that he did not wish to refer to anti-money laundering issues in iSignthis’ response to the 7 May query letter if that could be avoided. The defendants submit that this was because iSignthis was attracting adverse publicity arising from the suspension of trading in its shares, that he was worried the marketplace would misinterpret a response on this subject matter and that Mr Kevin Lewis (of the ASX) would misrepresent the issue because Mr Karantzis believed that the ASX was still trying to find a justification to support the continued suspension of trading in iSignthis’ shares. The defendants submit that Mr Karantzis’ concern in this regard was well founded in circumstances where the CBC has confirmed that no other fines or sanctions were imposed on iSignthis FEU in the period between 1 June 2021 to 30 May 2023.

17. The defendants submit further that by 24 May 2020 Mr Karantzis genuinely believed that the market had been notified of the Visa information in the letter to shareholders dated that day. This is because Mr Seyfort did not advise Mr Karantzis that the Visa information was required to be disclosed as part of iSignthis’ continuous disclosure obligations.

18. The defendants also maintain their submission in relation to the non-disclosure of the Visa information, that at all times relevant to these contraventions, shares in iSignthis were suspended and that the prospect of any trading in them was remote.

19. I am not satisfied that the seriousness of the contraventions relating to the Visa information is mitigated as contended for by the defendants insofar as their submission that there were sound “commercial reasons” for the delay in notifying the ASX is concerned.

20. As ASIC submits, it has been determined that Mr Karantzis had a “central role” in the company’s contraventions of s 674(2) of the Act (Liability Judgment at [465]). Mr Karantzis had a duty to ensure that iSignthis made disclosure to the ASX of the Visa information. That duty fell to him as managing director with the primary responsibility for determining what course the company would take in light of Visa’s termination of the relationship (Liability Judgment at [457]). Mr Karantzis’ failed in that duty “by authorising or permitting the company to commit contraventions”, and by jeopardising the interests of the company by exposing it to liability under the Act (Liability Judgment at [465]). The company’s contraventions were “navigated by Mr Karantzis himself” (Liability Judgment at [465]).

21. As ASIC also submits, the seriousness of this contravention is underscored by the fact that Mr Karantzis was well aware of the significance and materiality of the Visa information (Liability Judgment at [461]). Notwithstanding his asserted reliance on legal advice, Mr Karantzis was also well aware that iSignthis was required by Australian law to disclose the relevant information to the ASX (Liability Judgment at [461]).

22. As to the defendants’ submission that the finding at [459] of the Liability Judgment does not preclude them from making a submission that it was appropriate for notification of the Visa information to the ASX to be delayed while iSignthis prepared to notify the CBC first, I do not accept this submission. I am not persuaded that the conclusion at [459] should somehow be regarded as a “non-essential” or “subsidiary” finding for the purpose of the ultimate conclusion in the Liability Judgment that the obligation to advise the CBC was no defence to ASIC’s case that Mr Karantzis had a duty to ensure that iSignthis complied with its continuous disclosure obligations in the Act. The finding at [460] of the Liability Judgment was as follows:

    The weight of the evidence is that after 12 May 2020 Mr Karantzis made a decision that the company would refrain from making disclosure of the Visa Termination Decision and the Reasons for Visa’s Termination. Mr Karantzis decided that until the letter to shareholders dated 24 May 2020, no disclosure would be made.

23. This was the court’s conclusion on the basis of the evidence at the liability trial. Importantly, it was informed by Mr Karantzis’ failure to appear to give evidence in defence of his position.

24. Indeed, as ASIC submits, the evidence at the liability trial established that Mr Karantzis was not inclined to make disclosure to the CBC until the CBC itself raised the issue (Liability Judgment at [461]), and that even after the communication was received from the CBC, Mr Karantzis remained disinclined to make proper disclosure (at [462]). These conclusions remain undisturbed.

25. Even if it were feasible for the defendants to contend that it was somehow not entirely unreasonable for them to have proceeded as they did in all of the circumstances, the reality is that this point only has significance for a relatively short time – from 12 to 21 May 2020. There remains the period between 21 May 2020 and 17 August 2020 (with respect to the Visa Termination Decision) and the period between 21 May 2020 and 26 October 2020 (with respect to the Reasons for Visa’s Termination). Even on the defendants’ mitigation case as to this issue, any mitigation cannot be regarded as much more than negligible.

26. Nor am I persuaded that the reasons the defendants advance as to why the 24 May 2020 letter to shareholders did not achieve its intended outcome, and did not appropriately disclose the Visa information to the market, mitigate Mr Karantzis’ relevant conduct in any material way. Whatever the reason or motivation for doing so, after 12 May 2020 iSignthis and Mr Karantzis breached their non-disclosure obligations under the Act. I do not accept that Mr Karantzis’ subjective commercial motivations are materially relevant in explaining his conduct for the purpose of reducing the penalty to be awarded against him. This is especially so where Mr Karantzis failed to give evidence as to these matters in the liability trial.

27. Finally, as ASIC also submits, it has been determined that the suspension of iSignthis’ shares from trading on the ASX provided no defence to Mr Karantzis’ contravention of ss 180 and 674(2A) of the Act (Liability Judgment at [400], [429], [466]). In the circumstances of this case, particularly the nature of the contraventions that Mr Karantzis has been found to have committed and the findings in the Liability Judgment, the fact that trading of iSignthis’ shares on the open market was suspended does not mitigate against the seriousness of the non-disclosure of the Visa information for the purposes of penalty.

    25 May 2020 letter to the ASX

28. Mr Karantzis contravened ss 1309(2) and (12) of the Act in relation to the 25 May 2020 letter to the ASX (Declaration 10). This was a serious contravention (Declaration 11).

29. The defendants accept that the provision of correct answers to the ASX was ultimately the responsibility of Mr Karantzis as managing director and Mr Hart as chairman. Mr Karantzis acknowledges that the answers he provided to the ASX were false or misleading in contravention of s 1309(2) of the Act.

30. Nonetheless, the defendants submit that the manner in which iSignthis responded to the questions in the 7 May query letter was influenced heavily by what had come to be iSignthis’ hostile relationship with the ASX arising from the ASX litigation, and what they say was their reasonably held suspicion that the ASX was acting in breach of the law by sending numerous lengthy query letters. The defendants submit here also that a significantly mitigating factor is that Mr Karantzis relied upon the advice of Mr Seyfort in formulating the impugned responses to the ASX.

31. Notwithstanding his asserted reliance upon Mr Seyfort and others (to which I will come), Mr Karantzis’ contraventions of s 1309 of the Act were serious. As ASIC submits, the court determined that Mr Karantzis contravened s 1309 because he gave answers to the ASX that were “non-responsive”, “plainly wrong”, “obfuscatory”, “little more than sophistry” and “plainly misleading” (Liability Judgment at [547]-[552]). Mr Karantzis gave those answers in circumstances where he well knew the truth of the matters and well knew what the ASX’s direct questions were asking.

32. I accept ASIC’s submission that Mr Karantzis’ evidence as to the strained relationship between iSignthis and the ASX was no defence to liability under s 1309 of the Act, and in my view it is not a consideration which can operate to mitigate the assessment of disqualification or penalty. As was emphasised in the Liability Judgment, “it can never be reasonable to decide not to respond, or not to respond openly and candidly, to questions from the operator of a financial market” (Liability Judgment at [546]). The company’s troubled relationship with the ASX provides no basis for a more lenient view to be taken of Mr Karantzis’ responses in the 25 May 2020 letter (Liability Judgment at [562]). As ASIC submits, Mr Karantzis’ answers to the ASX went further than a mere failure to respond, or to respond openly and candidly, to the relevant questions.

    Conclusion as to the nature and seriousness of Mr Karantzis’ contraventions

33. It may be accepted, as the defendants submit, that Mr Karantzis’ contraventions which ASIC has proven are of a lesser order of seriousness than ASIC’s allegations concerning the Performance Shares. Nonetheless, this does not somehow transform or render insignificant those contraventions.

34. To the extent that the defendants seek to discount Mr Karantzis’ contraventions in relation to the 25 May 2020 letter to the ASX, including because they involved “sins of omission” and not positively misleading statements, I do not accept this submission.  Mr Karantzis’ contraventions, which include the sending of the 25 May 2020 letter to the ASX, involved an objective misleading of both the market and the market operator about matters which were material to the business of iSignthis and the market itself: see ASIC v Sino Australia at [22].  The one-off revenue contraventions occurred in a context where iSignthis was a start-up business building its recurring transactional revenue. The Visa contraventions occurred in circumstances where iSignthis had achieved Visa principal membership and was developing its card processing business without the need to rely on third party payment platforms. Both of these issues were of particular concern to the market, and Mr Karantzis was well aware of their importance.

35. Mr Karantzis’ conduct in relation to the one-off revenue and Visa contraventions is serious and significant, both in respect of its immediate effect on the market but also as to its tendency to undermine the confidence that market participants can place in the integrity and efficiency of the market: see Australian Securities and Investments Commission v Helou (No 2) [2020] FCA 1650 at [149] (Beach J).

1. ASIC notes that Mr Minehane gave evidence that he knew at the relevant time that the distinction between recurring and one-off revenue in the context of iSignthis was known by the market and was important to it (Liability Judgment at [201], [265]). ASIC refers also to the evidence that Mr Richards, too, was involved in preparing the investor briefing materials, understood the integration revenue and performance milestones (Liability Judgment at [138]) and communicated in detail with Mr Karantzis about it (Liability Judgment at [584]).

2. As ASIC submits, it is for these reasons that the failure by iSignthis to disclose the One-off Revenue/Costs Information was serious. And not only did iSignthis fail to disclose the information, on 3 August 2018 iSignthis contravened s 1041H of the Corporations Act by telling the market essentially the opposite when the One-off Revenue Representation was made by Mr Karantzis at the Analyst Briefing (Liability Judgment at [191]). This compounded the problem by perpetuating the market’s incorrect understanding of the proportion of recurring revenue (Liability Judgment at [177]-[178]). It also caused Mr Jacobs to publish a research note on 6 August 2018 that the Analyst Briefing “provide[d] the market with confidence that iSignthis ha[d] genuinely met the threshold to achieve all three tranches of the performance shares” (Liability Judgment at [202]). As has been mentioned, Mr Karantzis received a copy of that research note on 7 August 2018 (Liability Judgment at [163(j)]). The perpetuation of the market’s incorrect understanding required prompt correction by iSignthis, a fact that is acknowledged by Mr Hart (Liability Judgment [163(i)]).

3. ASIC notes correctly that this contravention continued for more than 15 months until the company notified the ASX of the true figure for one-off integration revenue in its 15 November 2019 response to an ASX query letter. It was upon publication of that response by the ASX that the information became generally available (Liability Judgment at [260]). However, there is no evidence that it has ever been publicly acknowledged by the company. I accept, as ASIC submits, that the length of continuing contravention is also indicative of the seriousness of the offending.

4. The defendants’ position once again is that iSignthis’ contravention of s 674(2) of the Act on and from 3 August 2018 was inevitable from the moment when the One-off Revenue Representation was made at the Analyst Briefing. The defendants submit that if the One-Off Revenue Representation had not been made by Mr Karantzis or had been corrected promptly, iSignthis would not have contravened s 674(2) of the Act in respect of the One-off Revenue/Costs Information.

5. ASIC notes that insofar as iSignthis’ contravention continued from 3 August 2018 until 12 March 2019, the maximum applicable penalty was $1,000,000. However, ASIC submits that by operation of s 1317QA of the Act it is appropriate for the court to have regard to the higher maximum penalty of $10,500,000 on the basis that separate contraventions of s 674(2) occurred each trading day, including each trading day on and from 13 March 2019 until 15 November 2019.

6. ASIC notes that the arithmetic maximum penalty is therefore the aggregate of the contraventions which occurred on each trading day, being approximately 174 trading days, which is more than $1.8 billion. ASIC concedes once again, however, that this must be balanced against the course of conduct and totality principles.

   Visa Termination Decision

7. iSignthis also contravened s 674(2) of the Act in failing to notify the ASX of the Visa Termination Decision from 12 May 2020 until 17 August 2020 (Declaration 3). This was a serious contravention (Declaration 5).

8. ASIC notes that the it was a finding in the Liability Judgment that disclosure of the Visa Termination Decision could and should have been made on or shortly after 12 May 2020 (Liability Judgment at [355]). There was no obligation under the law of Cyprus that iSignthis make a disclosure to the CBC before iSignthis made the required disclosure to the ASX (Liability Judgment at [355]) and, in any event, iSignthis did not disclose to the CBC that Visa had terminated its relationship with iSignthis (Liability Judgment [91]). For the reasons given earlier it is impermissible at the penalty stage for the defendants to attempt to re-litigate this issue in aid of a submission that iSignthis and its directors were trying to avoid risking the business of the company by “awaiting feedback” from the CBC before making an announcement to the market in Australia.

9. As ASIC notes, it was not until iSignthis’ 17 August 2020 response to the 5 August query letter that the company acknowledged explicitly to the ASX that Visa had terminated the relationship (Liability Judgment at [375]). By that date it was obvious to iSignthis by the terms of the 5 August 2020 query letter that the ASX had already obtained copies of the correspondence between iSignthis and Visa (Liability Judgment at [566]). The information with respect to Visa became generally available only upon the ASX publishing its query letters and iSignthis’ responses. As has been mentioned, there is no evidence that iSignthis has made any announcement to the market of the Visa Termination Decision.

10. It is clear, as ASIC submits, that the directors of iSignthis, including Mr Karantzis, knew that if the Visa Termination Decision was generally available information it would have had a material detrimental effect on the price or value of iSignthis’ shares. iSignthis’ principal membership of Visa was a matter of great significance for the company (Liability Judgment at [421]). Mr Hart and Mr Minehane gave that evidence (Liability Judgment at [378]-[380]). The company represented to the Director-General of Competition in Europe on 30 July 2020 that the termination would “cripple its future business” (Liability Judgment at [381]). Mr Karantzis made a similar representation to Visa (Liability Judgment at [381]). Ms Warrell gave evidence that the company also knew, and had recorded in its reporting, that Visa was its primary source of card processing GPTV, and if Visa had not suspended and then terminated iSignthis, Visa would have remained the leading source of card processing GPTV (Liability Judgment at [382], [421]). ASIC notes also that in addition to Mr Karantzis, Mr Hart and Ms Warrell were also involved in the decision-making process in relation to the non-disclosure of the Visa information (Liability Judgment at [347], [351]).

11. ASIC submits, and I accept, that the seriousness of iSignthis’ contravention is further underscored by the company’s publication of the 24 May 2020 letter to its shareholders. This letter clearly did not make disclosure of the Visa Termination Decision (Liability Judgment at [374]). It stated that iSignthis would “end its contractual relationship with Visa as a principal member in approximately 90 days”, and advised that the reason for the termination was that Visa had amended its rules, and that this amendment led to anti-competitive concerns. It was a finding in the Liability Judgment that the letter conveyed the impression that it was iSignthis that had severed the relationship with Visa because of difficulties that iSignthis had with changes to Visa’s rules (Liability Judgment at [374]). This was characterised as “essentially corporate spin of problematic information that was not generally available to the market”, in an attempt by iSignthis to “create a new narrative” (Liability Judgment at [374]). I accept ASIC’s submission that in a number of respects, this publication reflects the company’s contraventions in relation to the one-off revenue information – in each instance, not only did the company fail to disclose information that it knew to be material, but it represented the contrary position to the market.

12. The defendants submit that had the letter to shareholders conveyed the intended message, and not the distorted message which unintentionally arose from an amendment made by Mr Seyfort during the drafting process, the market and the ASX would have known by 24 May 2020 that Visa had decided to terminate its relationship with iSignthis such that the non-disclosure period would have been limited to 14 days (eight business days). As in relation to Mr Karantzis, contrary to the defendants’ submission I do not accept that these circumstances mitigate the seriousness of the contravention or the penalty to be imposed on the company.

13. This contravention by iSignthis of s 674(2) of the Act continued from 12 May 2020 until 17 August 2020. ASIC submits that the length of continuing contravention is also indicative of the seriousness of the offending. The maximum applicable penalty was $10,500,000 from 12 May 2020 and $11,100,000 from 30 June 2020. Again, by operation of s 1317QA, the arithmetic maximum penalty is the aggregate of the contraventions that occurred on each trading day. This is approximately $740 million (in relation to 69 trading days). ASIC accepts that this must be balanced against the course of conduct and totality principles.

    Reasons for Visa’s Termination

14. iSignthis contravened s 674(2) of the Act for failing to notify the ASX of the Reasons for Visa’s Termination from 12 May 2020 until 26 October 2020 (Declaration 4). This was a serious contravention (Declaration 5).

15. ASIC notes the determination that iSignthis never disclosed the Reasons for Visa’s Termination (Liability Judgment [375] and [460]). Some of that information became generally available on 26 October 2020 upon the publication by the ASX of extracts of Visa’s 17 April 2020 letter, however as with the Visa Termination Decision, I accept that there is no evidence that iSignthis has ever acknowledged the Reasons for Visa’s Termination or made any announcement to the market about them.

16. Once again it is ASIC’s position and I accept that the length of and continuing nature of the contravention is indicative of its seriousness.

17. As ASIC notes, Mr Hart gave evidence that he knew that use of anti-money laundering words in Visa’s reasons presented a critical risk to the iSignthis brand and its shareholder value (Liability Judgment at [378]). Similarly, Mr Minehane gave evidence that he and all of the directors including Mr Karantzis were acutely aware in May 2020 that the link to anti-money laundering issues would have been materially detrimental to the value of iSignthis, and more detrimental than the termination decision alone (Liability Judgment at [380]). Mr Sisson gave similar expert evidence that the risks perceived by a valuer “would rise materially” if Visa’s reasons were to become generally available (Liability Judgment at [391]). ASIC submits and I accept that iSignthis and its directors therefore went to considerable lengths to ensure that Visa’s reasons were not publicly disclosed.

18. In defence of the company’s position the defendants maintain that the company’s reliance on legal advice is a significant consideration and necessitates a reduction in the penalty to be imposed in respect of this contravention. In this regard the defendants submit that the company was not advised by Mr Seyfort, that the Reasons for Visa’s Termination as set out in the 17 April Visa letter ought to be disclosed, and had it been so advised it would have included a rebuttal. iSignthis submit also that after 24 May 2020 the company continued to rely on the advice of Mr Seyfort as well as the two reports received from Clayton Utz, which did not require iSignthis to make any further disclosure to the market in relation to the termination of the relationship with Visa or the reasons for the termination of that relationship.

19. For the reasons I have explained above in relation to Mr Karantzis, I do not accept that the company’s asserted reliance on the advice of Mr Seyfort and Clayton Utz is a consideration that justifies a reduction in the penalty to be imposed on iSignthis in respect of this contravention.

20. iSignthis’ contravention of s 674(2) occurred from 12 May 2020 until 26 October 2020. Once again, the maximum applicable penalty was $10,500,000 from 12 May 2020 and $11,100,000 from 30 June 2020. Again, by operation of s 1317QA of the Act, the arithmetic maximum penalty is the aggregate of the contraventions that occurred on each trading day. This is well over $1 billion (in relation 119 trading days), although ASIC submits that his must be balanced against the course of conduct and totality principles.

    Course of conduct and totality principles

21. As in relation to Mr Karantzis, the defendants submit that iSignthis’ contraventions which occurred in 2020 concerning the non-disclosure of the Visa information arose from a single event (Visa’s termination of the relationship) and that the course of conduct and totality principles are applicable to ensure that the pecuniary penalty is not out of proportion to the conduct: see ASIC v Healey (No 2) at [131]).

22. I am prepared to proceed, as I did with Mr Karantzis, on the basis that iSignthis’ contraventions of the Act in 2020 in relation to the non-disclosure of the Visa information involve essentially the same underlying conduct. As with Mr Karatnzis’ conduct, iSignthis may therefore be regarded as having engaged in two courses of conduct: the 2018 course of conduct in respect of the One-off Revenue/Costs Information contravention, and the 2020 course of conduct with respect to the non-disclosure of the Visa information. I accept that there would be the risk of double punishment if this was not recognised.

23. As with Mr Karantzis’ contraventions, it is necessary to have regard to the totality principle and I have done so in determining the appropriate penalty to be imposed against iSignthis: see ACCC v Telstra at [230]; ASIC v Healey (No 2) at [129]. 

    The appropriate pecuniary penalty to be ordered against iSignthis

24. Obviously enough, because it is clear that Mr Karantzis was the guiding mind of iSignthis at all relevant times, much of the consideration above which is relevant to the disqualification and penalty to be ordered against him is also relevant to the assessment of the penalty to be paid by iSignthis. It is unnecessary to repeat that analysis, or my determination, but it must be borne in mind. It is, however, important to have regard to certain additional matters which were raised by the parties concerning iSignthis in particular.

25. First, as has been mentioned, in addition to Mr Karantzis, other senior executives of the company were involved in the contraventions (Mr Richards and Ms Warrell), as were members of the board of iSignthis (Mr Hart and Mr Minehane). This is a relevant consideration and I take it into account.

26. Secondly, it is also the case that, like Mr Karantzis, iSignthis has shown a lack of contrition and insight into the seriousness of its contraventions. In this regard ASIC again draws attention to the press release issued by the company on 24 June 2024, following publication of the Liability Judgment. I have accepted that this announcement is relevant in that it conveys an absence of contrition or insight on the part of the company. As I have explained, the fact that this announcement was apparently drafted by the company’s legal advisors is irrelevant in all the circumstances.

27. It is also notable that, like Mr Karantzis, Mr Hart gave evidence that he believes that the ASX suspension was “a misuse of power”. In circumstances where the court’s findings have substantially vindicated the ASX’s conclusions as to the One-Off Revenue Representation, and its concerns in relation to the Visa non-disclosures, I consider that Mr Hart’s evidence also exhibits a lack of insight and contrition on behalf of the company. As with Mr Karantzis’ evidence, it has a defiant tone.

28. Thirdly, as ASIC submits, there is no evidence that iSignthis has taken any remedial or disciplinary steps, that it has revisited any compliance systems, or that it has conducted any education to prevent future contraventions. I do not regard Mr Karantzis’ completion of the CySec advanced examination as especially significant in this regard. The attitude of Mr Karantzis and Mr Hart in particular demonstrates that the company’s view, at its highest level, is that no systematic remedial steps are required.

29. Fourthly, as with Mr Karantzis’ contraventions, the suspension of iSignthis’ shares from trading on the ASX provided no defence to the contravention of s 674(2) by iSignthis (Liability Judgment [400], [429]), and does not affect the seriousness of the departure from the company’s disclosure obligations. As I have determined with respect to Mr Karantzis, the suspension of the shares is not exculpatory for present purposes.

30. Fifthly, as ASIC submits, the court must consider the capacity of iSignthis to pay as at the time of the contraventions, and must also give consideration to whether assets of the company have been removed from its hands at a time when exposure to a pecuniary penalty was a real possibility: see ASIC v Holista Colltech at [136]; ASIC v Select AFSL (No 3) at [118]-[119]).

31. In this connection ASIC notes that iSignthis’ revenue was growing substantially in 2019 and 2020, and that its consolidated revenue in the 2019 financial year was more than $30 million, and more than $37 million in 2020 (Liability Judgment at [628], [631]).

32. Nonetheless, ASIC notes that in October 2021, after the commencement of this proceeding, iSignthis effected the demerger of iSignthis FEU by reducing capital through a distribution of iSignthis FEU shares to existing shareholders of iSignthis. In this regard ASIC notes the evidence that Mr Karantzis was involved in conceiving of and effecting the demerger, that there was no provision at all made for potential penalties or costs to be paid in this proceeding, and that it was an intended result of the demerger that the remaining Australian entity of iSignthis be left with limited assets and cash reserves. To the extent that ASIC submits that the demerger was effected in order to ensure that assets were removed from iSignthis FEU for the purpose of avoiding a penalty in this proceeding, I do not consider that the evidence before the court supports unequivocally a conclusion that this is so. I acknowledge the evidence given by Mr Karantzis, Mr Hart and Mr McGrouther in this regard that the purpose of the demerger was to provide iSignthis FEU with a mechanism to list on the stock exchange in Europe and therefore enable it to trade there and enhance its ability to raise capital.

33. The demerger, it may be accepted, saw the wider iSignthis group’s revenue-producing businesses and assets, including the iSeM licence described by Mr Hart as the “most precious thing” for iSignthis and central to its continuing business (Liability Judgment at [445]), transferred to Europe. The evidence is that in the financial year ended 31 December 2021, iSignthis’ annual report indicates that sales revenue from Australian operations was approximately $150,000 compared to approximately $26 million from European operations. It is also the evidence that iSignthis FEU recorded substantial net profits in the 2022 and 2023 financial years, and that while iSignthis has previously recorded significant profits, in the year ended 31 December 2023 it recorded a loss of $3.6 million with no revenue generated. Its only revenue was a small amount of interest earned on reducing a convertible note issued in 2021. The evidence is also that on 4 November 2022 the company was delisted from the ASX.

34. The upshot, it seems clear, is that iSignthis may not be in a position to pay a large pecuniary penalty absent an influx of funds from iSignthis FEU.

35. Nonetheless, whatever might be said about the present capacity of iSignthis to pay, and about the operation of s 553B of the Act in relation to the Commonwealth’s ability to prove in any insolvency, I do not consider that the possibility of non payment outweighs the importance of general deterrence in all the circumstances. 

1. Sixthly, as with Mr Karantzis, I accept that prior to this proceeding iSignthis had not been found to have contravened s 674 of the Act or any other statutory provision.

2. Seventhly, I also accept ASIC’s submission that iSignthis’ contraventions have caused loss and damage in the sense that they have caused harm to the market. This being a civil penalty proceeding, it is unnecessary to quantify actual loss suffered by shareholders. As I have found, the consequence of iSignthis’ contraventions was that iSignthis’ share price was artificially and improperly inflated (Liability Judgment at [178]). To the extent that the defendants submit that none of iSignthis’ contraventions have caused loss or damage, I reject this submission.

3. I also accept ASIC’s submission that although iSignthis will likely not be in a position to commit similar contraventions of the Act in the future, general deterrence in a serious case such as the present remains critical: ASIC v GetSwift at [68]. While proportionality is to be favoured over retribution, the court must impose a penalty which reflects the court’s disapproval of the conduct which has resulted in the contraventions.

4. The $350,000 penalty proposed by iSignthis for its contraventions is plainly untenable. As with the penalty that the defendants proposed for Mr Karantzis, it is derisory and manifestly inadequate to effect any form of deterrence. As with Mr Karantzis, I am prepared to accept that there is a risk that such a penalty would be viewed by iSignthis as an acceptable cost of doing business: Pattinson at [17].

5. Nonetheless, noting the description of the process of intuitive synthesis in ASIC v Murray Goulburn at [36]-[37], and taking all relevant matters and circumstances into account, including the course of conduct and totality principles, I have concluded that a pecuniary penalty of $12.5 million exceeds what would be required to achieve the necessary deterrent effect. That amount should therefore be regarded as too high.

6. In my assessment, again having regard to all relevant matters and circumstances, iSignthis should be required to pay a pecuniary penalty of $10 million for the contraventions it has been found to have committed. As with Mr Karantzis, I am satisfied that a penalty amount of $10 million is appropriate and proportionate in all the circumstances and would give effect to the objectives of specific and general deterrence.

   CONCLUSION

7. There will therefore be orders that:

   (a)Mr Karantzis be disqualified from managing corporations for a period of six years pursuant to ss 206C(1) and 206E(1) of the Act;

   (b)Mr Karantzis pay to the Commonwealth a pecuniary penalty of $1 million within 30 days of the date of the orders, pursuant to s 1317G(1) of the Act, in respect of his contraventions of ss 180(1), 674(2A) and 1309(2) and (12) of the Act identified in paragraphs 6 to 11 of the orders dated 26 July 2024; and

   (c)Southern Cross Payments Ltd (formerly iSignthis Ltd) pay to the Commonwealth a pecuniary penalty of $10 million within 30 days of the date of the orders, pursuant to s 1317G(1) of the Act, in respect of the contraventions of s 674(2) of the Act identified in paragraphs 2 to 5 of the orders dated 26 July 2024.

8. There will also be orders that in the absence of agreement in relation to the costs of and incidental to the proceeding the parties may file submissions on the question of costs within the next 30 days (limited to six pages), and any responsive submissions on the question of costs within 14 days following this (limited to three pages). Any question of the costs of the proceeding will be determined on the papers.

I certify that the preceding three hundred and fifteen (315) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McEvoy.

Associate:

Dated:       8 August 2025

ANNEXURE A

Federal Court of Australia

District Registry: Victoria Registry

Division: General No: VID773/2020

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

ISIGNTHIS LIMITED (ACN 075 419 715)

and another named in the schedule
Defendant

ORDER

JUDGE:	Justice McEvoy
DATE OF ORDER:	26 July 2024
WHERE MADE:	Melbourne

THE COURT NOTES THAT:

Definitions

A.The following defined terms are adopted in the paragraphs which follow:

TermDefinition

iSignthisiSignthis Limited (ACN 075 419 715), now Southern Cross Payments Ltd, the First Defendant

Mr Karantzis     Nicholas John Karantzis, the Second Defendant

Analyst Briefing The online Analyst Briefing held by iSignthis on 3 August 2018

ASXAustralian Securities Exchange

VisaThe entities operating under the umbrella of Visa Inc (except Visa AP)

THE COURT DECLARES THAT:

Declarations concerning iSignthis

1.By representing on 3 August 2018 that iSignthis’ revenue for one-off integration and set-up fees in the period 1 April 2018 to 30 June 2018 accounted for less than 15% of the total revenue in that period, iSignthis engaged in conduct that was misleading or deceptive in contravention of section 1041H of the Corporations Act 2001 (Cth).

2.Pursuant to section 1317E of the Corporations Act, iSignthis contravened section 674(2) of the Corporations Act on and from 3 August 2018 continuing until 15 November 2019 by failing to notify the ASX that, in the final quarter to 30 June 2018:

(a)it had recognised approximately $3 million in revenue for one-off integration and set-up services; and

(b)it had incurred approximately $2.85 million in one-off costs for out-sourcing services,

(One-off Revenue/Costs Information).

3.Pursuant to section 1317E of the Corporations Act, iSignthis contravened section 674(2) of the Corporations Act on or shortly after 12 May 2020 continuing until 17 August 2020 by failing to notify the ASX that Visa had decided to terminate its relationship with iSignthis eMoney Ltd and iSignthis in accordance with the Visa Rules (the Visa Termination Decision).

4.Pursuant to section 1317E of the Corporations Act, iSignthis contravened section 674(2) of the Corporations Act on or shortly after 12 May 2020 continuing until 26 October 2020 by failing to notify the ASX that the reasons for the Visa Termination Decision included that:

(a)iSignthis’ response to the 6 March 2020 suspension letter had “not allayed the concerns outlined in the Suspension Letter”;

(b)Visa had obtained further evidence that “IsignThis is not operating appropriate programs to manage Anti-Money Laundering and Risk”;

(c)iSignthis’ transaction monitoring program was “not fit-for-purpose” and had failed to identify unusual transactional behaviour”; and

(d)Visa’s relationship with iSignthis presented an excessive level of risk,

(the Reasons for Visa’s Termination).

5.The contraventions by iSignthis referred to in paragraphs 2 to 4 above were serious within the meaning of section 1317G(1)(b)(iii) of the Corporations Act.

Declarations concerning Mr Karantzis

6.Pursuant to section 1317E of the Corporations Act, Mr Karantzis contravened section 180 of the Corporations Act in respect of the contravention by iSignthis referred to in paragraph 1 above by:

(a)failing to exercise the degree of care and diligence that a reasonable person would have exercised in his position as a director of iSignthis to:

(i)ensure that he and iSignthis provided reliable, truthful and accurate information to the market at the Analyst Briefing;

(ii)ensure that he and other representatives of iSignthis were prepared to respond to questions and give reliable, truthful, accurate and responsive answers in the written material at the Analyst Briefing;

(iii)correct any misunderstanding, misconception or incorrect information released or disseminated to the market of which he or iSignthis was, or became, aware;

(b)by either knowingly misrepresenting that iSignthis’ revenue for one-off integration and set-up fees in the period 1 April 2018 to 30 June 2018 accounted for less than 15% of the total revenue in that period or intentionally or recklessly acting to prevent the truth about that subject matter from being disclosed.

7.Pursuant to section 1317E of the Corporations Act, Mr Karantzis was involved in the contravention referred to in paragraph 2 above and thereby contravened section 674(2A) of the Corporations Act.

8.Pursuant to section 1317E of the Corporations Act, Mr Karantzis contravened section 180 of the Corporations Act in respect of the contravention by iSignthis referred to in paragraph 2 above by failing to exercise the degree of care and diligence that a reasonable person in his position would have exercised in considering whether iSignthis was required to disclose the One-off Revenue/Costs Information.

9.Pursuant to section 1317E of the Corporations Act, Mr Karantzis contravened section 180 of the Corporations Act in respect of the contraventions by iSignthis referred to in paragraphs 3 and 4 by failing to exercise the degree of care and diligence that a reasonable person in his position would have exercised to ensure that on or shortly after 12 May 2020 iSignthis disclosed to the ASX the Visa Termination Decision and the Reasons for Visa’s Termination.

10.Pursuant to section 1317E of the Corporations Act, Mr Karantzis gave or authorised the giving of information to the ASX in a letter dated 25 May 2020 relating to the affairs of iSignthis that was false or misleading and/or misleading in a material respect by reason of omissions, without having taken reasonable steps to ensure that the information was not so false or misleading, in contravention of sections 1309(2) and (12) of the Corporations Act.

11.The contraventions by Mr Karantzis referred to in paragraphs 6 to 10 above were serious within the meaning of section 1317G(1)(b)(iii) of the Corporations Act.

THE COURT ORDERS THAT:

Dismissal

12.The Plaintiff’s claims against Mr Karantzis are otherwise dismissed.

Other matters

13.The time for filing an application for leave to appeal and/or notice of appeal in respect of the declaratory orders made on 26 July 2024 be 28 days after the final orders are made in the proceeding.

14.Costs reserved.

15.The parties have liberty to apply.

Date orders authenticated: 29 July 2024

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Schedule

No: VID773/2020

Federal Court of Australia

District Registry: Victoria Registry

Division: General

Second Defendant NICKOLAS JOHN KARANTZIS