Maggot magnate facing criminal charges resigns from celebrated start-up

James Sackl has resigned.Credit: jamessackl.com

The chief executive of a celebrated Melbourne biotech start-up who is facing fraud charges has resigned, with the board insisting investors have not been kept in the dark as it seeks to raise millions in funding.

In July, Karma3, a Thomastown-based start-up which bred flies whose larvae turn waste into animal feed, launched an investment funding round seeking up to $5 million.

Material presented to investors describes James Sackl as founder and CEO of Karma3 and a key part of its management team.

The marketing documentation makes no mention of the fact that in 2017 Mr Sackl was charged with 29 counts of fraud, delivering documents containing false information, acting as a migration agent without being registered and being paid for it 2012 and 2013. Another charge has since been added. He has submitted a plea of not guilty to all 30 charges.

The entrepreneur was charged under the name "Andrew Sackl" and the matter is set for trial in May. If Mr Sackl is found guilty, he could be barred from being a company director.

However, it is unclear whether Karma3's board members and investors were made aware of Mr Sackl's charges.

Karma3 is in the process of raising $3 million to $5 million in capital and has been profiled by ABC, Vice and China’s largest media organisation,  Xinhua.

Karma3's chairman, former CSIRO scientist and Order of Australia recipient Professor Paul Wood, told The Age and The Sydney Morning Herald on Thursday that he was not aware Mr Sackl was facing criminal charges, or that he used to go by the name Andrew.

On Friday, Karma3 issued a statement through its corporate adviser, Delcor, stating: "As part of the due diligence, James Sackl’s personal issues were revealed by James. Namely the issue in the County Court in regard to an Immigration College he was involved [with] in 2011.

"The decision was made at the very onset of starting Karma3 that if James’s issues began to hurt the project, then he would resign from the board and the company and Martin Pike [the company's current COO] would assume the CEO role.

Karma3 is a Thomastown-based start-up which bred flies whose larvae turn waste into animal feed.Credit: Sydney Morning Herald

"The board also informed James that once his issues had been satisfactorily resolved that there would be no barrier to him re-joining the company and the company would wish for that to happen."

Andrew Lawson, former managing director of successful biotech outfit MBD Energy, is also on the board. Mr Lawson declined to comment on the record.

Delcor representative Peter Graham said Mr Wood and Mr Lawson were made aware of Mr Sackl’s charges before they became board members.

When asked why Mr Wood told The Age he had not been aware, Mr Graham suggested Mr Wood might have been "confused" by the mention of "criminal charges".

Late on Friday, Professor Wood told The Age that the company had enacted a "contingency plan".

"That was put in place based on the fact that unfortunately someone has decided to provide me with confidential information to damage James," he said, referring to the questions put to him by The Age.

Reach Markets, which is managing Karma3's investor relations, declined to say whether it was aware of the charges and whether potential investors had been told.

Legal fees

Questions have also been raised about whether Karma3's funds were used to pay for Mr Sackl's personal lawyers' fees. The Age has seen bank statements that appear to show $77,000 was withdrawn for a criminal law firm, a commercial law firm which represented Sackl in a previous civil case and another law firm which is listed as representing Sackl in a separate civil case.

The same account appears to have been used to pay Karma3 employees and receive deposits labelled "Karma3 proceeds" totalling $425,000.

Mr Graham said the company was aware of the transactions and that Mr Sackl had disclosed he was under financial pressure.

Mr Wood said the company had also recently conducted an audit of its finances for the past two years.

"In doing so, there were a number of companies where there had been cross-company activities, and we have resolved all those issues."

He said those "four or so" companies were linked to Mr Sackl.

Asked what information had been conveyed to investors, Mr Wood said: "That we have two years of audited accounts - that's the most important thing for shareholders, that accounts of company are in order and we've conveyed that to shareholders."

Deceptive conduct

In September this year, Mr Sackl was ordered by the NSW Supreme Court to pay $384,000 to a Sydney migration agent over claims of deceptive conduct.

The migration agent, who The Age has chosen not to name, claimed in an affidavit she signed a contract with Mr Sackl for him to help her clients find employers willing to sponsor them for visas, without being told the Singaporean company Mr Sackl was signing on behalf of was deregistered.

According to court documents the agent paid money into the bank account of an Australian company, Sino Resources (Aust), as well as a Chinese bank account. Mr Sackl was the sole director of Sino Resources (Aust).

However, the documents show the nine clients she referred then started receiving calls from the Department of Immigration saying the employers that had been nominated were not genuine.

Mr Sackl told her the employers were just "nervous" and had misspoke when speaking to the Department of Immigration. But when her lawyer rang one, the employer denied knowing anything about it.

She requested a refund from Mr Sackl, but a month later, Sino Resources (Aust) went into liquidation.

In a hearing where Mr Sackl was not present, the judge ruled in favour of the agent, saying: "The undisputed evidence soundly establishes on the balance of probability that the defendant [Mr Sackl] engaged in misleading and deceptive conduct.''

Mr Sackl is also being sued by Rotstein Commercial Lawyers in the Victorian Supreme Court over claims he failed to pay them over $360,000 when they were engaged as his commercial lawyers between 2017 and 2018. Mr Sackl did not respond to questions.