iSignthis on hold amid ASIC probe

The $1 billion-plus fintech company is coming under intense scrutiny over disclosure issues.

Shares in the former market darling iSignthis will remain suspended indefinitely as ASIC and the Australian Securities Exchange deepen their probe into the fintech company.

On Friday, the ASX released responses from the payments and identity technology company to a lengthy list of queries dispatched on October 2.

Asked how many current customers operated cryptocurrency exchanges or engaged in crypto activities, iSignthis said it had 20 “relatively small” customers, which were among 310 current and former contracted entities.

It said its Paydentity platform screened clients of those customers under a process called “know your customer’s customer” to ensure compliance with anti-money laundering and counter-terrorism financing legislation.

In the September quarter, iSignthis said 6.5 per cent of its unaudited revenue was crypto-related.

Total revenue for the June half-year was $8.1 million.

Chief executive John Karantzis said on Friday that the company would cooperate with the regulators.

“ISignthis will continue to update shareholders where appropriate and will continue to co-operate with regulators and answer any questions the ASX or ASIC may have,” Mr Karantzis said.

The company also said that, last Tuesday, ASIC issued a notice to produce certain books in relation to compliance with continuous disclosure obligations under the Corporations Act.

Asked if it had previously been the subject of any regulatory investigation, iSignthis said an ASIC review of the 2108 financial year focused on the treatment of merchant funds following the watchdog’s action to freeze funds and start action against two clients of its authenticate unit.

It said the reclassification of the funds had only just been finalised with ASIC, and this was disclosed to the ASX on September 24.

Regulators have been heavily scrutinising iSignthis after its shares spiked this year from 14c to a record high of $1.765 last month.

The company’s value peaked at about $1.8 billion but it hit turbulence after a report by proxy advisory firm Ownership Matters.

The report raised disclosure concerns about the issue of performance rights to executives, which were triggered by the achievement of revenue targets.

In its responses to the ASX, iSignthis said it was in full compliance with its disclosure obligations.

“Although the company does not regard any new information contained in this response letter to be disclosable under its continuous disclosure obligations, except by way of a reference to having responded to these queries as raised by the ASX themselves,” the statement said.

Further, no regulator had issued any notices to the company regarding its relationship as a customer to the failed Danish bank KAB.

The company held basic deposit accounts at KAB, in which client funds were deposited “for safeguarding”.