Nuix rocked by insider trading allegations against former executive

The recently sacked chief financial officer of Nuix, Stephen Doyle, along with his brother Ross and father Ronald are the subject of a criminal investigation into insider trading and dealing with the proceeds of crime over Nuix shares.

On Tuesday, the corporate regulator took emergency action to stop Ross Doyle, 49, from leaving the country, stating that they believed he would not return if allowed to depart for Switzerland.

Former Nuix CFO Stephen Doyle. His penthouse was searched by Federal Police after ASIC obtained a travel ban on his brother Ross.Credit:

An affidavit filed with the court by ASIC in support of this action reveals that the brothers are accused of insider trading in Nuix shares during the period of January 22 to February 12, 2021.

During this period, Stephen Doyle, 50, is alleged to have passed on to his brother Nuix’s expected poor performance, which allegedly led Ross to sell 1.8 million Nuix shares which he held in an account of Black Hat, a company set up in Singapore on November 24, 2020, just before the prospectus was released. Nuix provides the software platforms that regulators, police investigators and tax officials around the world use to run highly sensitive investigations.

Black Hat was established two weeks before Nuix’s stellar debut on the Australian stockmarket on December 4 with the shares offered at $5.31 each. By January 22 the shares had almost doubled in value, hitting a peak of $11.86.

But the half-yearly results on February 26 included a profit downgrade causing the share price to plummet by 32 per cent. Further downgrades followed.

Following a series of revelations by The Sydney Morning Herald, The Age and The Australian Financial Review, the Nuix share price has plunged to record lows, trading at less than half its issue price and slashing the value of the company by $3 billion since its January peak. Nuix has posted two earnings downgrades, terminated Stephen Doyle as CFO by mutual agreement and accepted the resignation of CEO Rod Vawdrey.

An affidavit filed by ASIC states that in the five weeks leading up to the company’s disastrous half year results, Ross Doyle sold 2 million shares in Nuix for $17.8 million, saving them more than $5.7 million if they had been sold on the day the half year financial results were released, which saw the shares fall a whopping 32 per cent.

Stephen Doyle is also accused of communicating inside information to his brother, who then allegedly acted on the information and proceeded to sell 200,000 Nuix shares in his own account on February 5.

The affidavit said it believed Stephen Doyle had a financial interest and was a beneficial owner of the Black Hat account and stood to benefit from tipping off his brother to sell the shares. “I believe he was one of the beneficial owners of the 200,000 Nuix shares in the Ross Doyle trading account,” the affidavit says.

Stephen Doyle, as CFO of Nuix had “significant visibility” into Nuix’s financial performance and “procured” his brother to action the share sales, the affidavit says.

It says in that role he should have known that it would have a material negative effect on the share price and by selling the shares before the February 26 profit announcement, the brothers managed to avoid a “material loss”.

The maximum penalty for insider trading is 15 years’ imprisonment.

The ASIC affidavit also indicates that a separate investigation is underway into the prospectus Nuix lodged for its Initial Public Offering last year which is alleged to contain false and misleading information.

The corporate regulator is also looking at possible contraventions of the Corporations Act in relation to three years of Nuix’s financial statements lodged with ASIC.

The Doyle brothers will be examined by ASIC this week.

On June 27, days after the raid by ASIC and the AFP, Ross Doyle applied for a travel exemption to return to Switzerland, indicating he wanted to return home as he had been “stuck in Australia”. The application was denied. The affidavit said ASIC planned to examine him this week.

Nuix told the ASX on Wednesday morning it was “disturbed” by the insider trading allegations involving its former chief financial officer and had yet to be formally notified by ASIC about any investigation of its financial accounts and its prospectus.

“We are genuinely disturbed by the allegations concerning Mr Doyle and will fully assist ASIC in getting to the bottom of that matter,” said Nuix chairman Jeffrey Bleich in the statement to investors.

Nuix said it was not aware of the precise nature of the investigation beyond the information in the court documents lodged by ASIC and said it has not received any formal notification from ASIC in relation to any such investigation.

“Nuix is fully committed to cooperating in any such investigation,” it said.

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