Perth-based natural wellness company Holista CollTech and its former boss have been hit with $2 million in fines for falsely claiming its plant-based hand sanitiser killed COVID-19 and giving the market overinflated sales forecasts.
In a judgment handed down in the Federal Court on Tuesday, Justice Sarah Derrington found the biotech company and its former chief executive Dr Rajendran Marnickavasagar — also known as Dr Rajen — had engaged in “serious” contraventions of the Corporations Act and made misleading claims to investors.
The court found the former chief executive Dr Rajendran Marnickavasagar — also known as Dr Rajen — had engaged in “serious” contraventions of the Corporations Act.
The corporate watchdog dragged Holista CollTech and Marnickavasagar to the Federal Court in 2021, accusing them of misleading conduct.
The claims centred around a YouTube video published in February 2020, in which Marnickavasagar claimed the company’s NatShield sanitiser spray killed the coronavirus involved in the Wuhan outbreak, despite it not having been tested against COVID-19.
Two months later, the biotech company told the market alternative medicine firm Health Therapies LLC had placed an $3.8 million order for 415,000 bottles of the sanitiser.
The company was forced to backtrack in July, when it told the market the forecasted sales would not be met and the product’s expected revenue for the 2019/20 financial year had plummeted to $500,000.
But the Australian Securities and Investments Commission told the court that was because the order was never placed.
The corporate watchdog also accused Holista of claiming it had executed a deal with another company to co-develop a new sanitising nasal balm in February 2020, despite that deal not being inked until two months later.
On Tuesday, Derrington ordered Holista Colltech pay $1.8 million for breaching the law and engaging in deceptive conduct and demanded Marnickavasagar cough up $150,000 within 28 days.
Marnickavasagar was also disqualified from managing a corporation for four years and ordered to pay ASIC $200,000 to help cover its legal bill and the costs of its probe.
ASIC deputy chair Sarah Court said the regulator continued to focus on suspected misleading statements made to the market during the pandemic.
Holisa entered a trading halt on Tuesday morning ahead of the court judgment.
In December, Holista told the market it had concluded formal negotiations with ASIC and the board was mulling a replacement for Marnickavasagar.
It is understood the former chief executive remains a major shareholder in the company, which has a market capitalisation of $2.78 million.
Holista CollTech is headquartered in Perth but also has operations in the United States, Malaysia, Hong Kong, Singapore and India.
The company conducts research and produces a variety of health products, including dietary supplements, alcohol-free sanitisers and disinfectant wipes.
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