Legal firm K&L Gates dumps Magnis while company faces a legal fight

In a notice lodged to a Delaware court in the US, corporate law firm K&L Gates said Magnis had ‘failed to fulfil substantial payment obligations to counsel’.

ASIC alleges Magnis was aware iM3NY factory plant was not operating.

Magnis Energy Technologies has been dumped by its lawyers as the ASX-listed graphite and energy player grapples with a looming court fight.

In a notice lodged in a Delaware court, corporate law firm K&L Gates said Magnis had “failed to fulfil substantial payment obligations to counsel despite ­numerous reasonable and good-faith warnings that counsel would withdraw unless the payment obligations were fulfilled”.

K&L Gates partner Steven ­Caponi told the court Magnis had been given weeks to find new lawyers in a case in the US in which it faces off against its former tech partner Charge CCCV, but the company had failed to do so.

This came on April 30, the same day the corporate regulator handed K&L Gates’s Australian office a notice warning that Magnis and its long-term chair Frank Poullas faced legal action over extensive allegations of misleading the market.

K&L Gates partner Christien Corns declined to comment.

The move to dump the company comes as Magnis and Mr Poullas prepare to face down a fight with the Australian Securities and Investments Commission, which alleges they misled the market.

Court papers lodged by ASIC alleges Magnis knew for almost 18 months its battery factory was not working, but failed to reveal the news to shareholders despite repeated warnings from company figures.

The filing comes as Magnis revealed it was broke and had resorted to tapping shareholders for an unsecured financial lifeline after running dry a $4.6m high interest loan.

Accounts filed by Magnis revealed it had just 3.6 days of funding remaining as of March 31, with just $28,000 in the bank.

Almost 33 days later, shareholders are now wondering if Magnis remains solvent, with no news about the company’s future beyond a small note confirming it had once again rolled over its $4.6m loan with a company associated with Sydney private lenders Koa Capital.

Magnis chair Frank Poullas.

Mr Poullas, who is alleged to have known about the disaster at the company’s battery factory Imperium3 New York, is nowhere to be seen, with the company failing to respond to repeated attempts to contact it.

However, an account on X, formerly Twitter, in Mr Poullas’s name did weigh in, telling shareholders “we are working around the clock in the background to make sure we turn around the current situation”.

“I too have put the majority of my savings into this company and I have been working without any pay for nearly 12 months,” he said.

Magnis faces a reckoning, with the court process set to reveal the many moments the regulator alleges the company and its chair allegedly lied to investors.

But the pain may not be limited to a pursuit of Mr Poullas or Magnis, with ASIC understood to also be considering potential court action against other directors.

These include Australian property development group managing director Fabrizio Perilli, who joined the board in July last year, as well as managing director (US) Hoshi Daruwallah, who told shareholders at the company’s annual general meeting iM3NY was spinning out 300 cells a day, before months later Magnis revealed this was not the case.

Tanzania-based director Peter Tsegas, may also be in the firing line, along with philanthropist Giles Gunesekera, who joined the board in January 2022.

ASIC alleges Magnis’s board knew iM3NY’s machines, bought in a $5m fire sale years earlier, were pumping out duds with 95 per cent of cells unusable.

This was despite Magnis dumping at least $95m of shareholder funds into the factory, alongside tapping US lenders Atlas Credit Partners for a $US100m ($147m) facility to bankroll the retrofitting of an old car factory in the upstate New York town of Endicott.

ASIC alleges Magnis knew in January last year there were big problems at iM3NY.

Originally published as Legal firm K&L Gates dumps Magnis while company faces a legal fight