Super fintech’s future in doubt as Sargon falls into receivership

The future of high-profile super fintech Sargon is under a cloud following the abrupt resignation of its chairman.

Sargon chairman Robert Rankin. Picture: Britta Campion

The future of high-profile superannuation fintech Sargon is under a cloud following the abrupt resignation of former Crown Resorts chairman Rob Rankin and moves by a Chinese state-owned trustee to put its holding company, Sargon Capital, into receivership.

Sargon, which claims to administer $55bn in super savings across its trustee business and counts former Labor senator Stephen Conroy as a director, has also come under focus from financial regulator APRA, which is understood to be monitoring the receivership.

Sargon Capital, which had been eyeing a stockmarket listing last year, was placed into receivership by a creditor company, Taiping Trustees, The Australian revealed online yesterday. The move came as Sargon’s chief executive and co-founder Phillip Kingston was talking up the prospects of Sargon at a Senate inquiry in Melbourne on Thursday.

It also emerged that Mr Rankin had stepped down as the company’s chairman on January 23 after nearly two years in the role.

Late on Thursday Mr Rankin was still listed as independent chairman of Sargon Capital on the company’s website.

It is understood Mr Kingston received an email on Wednesday night from lawyers at McGrathNicol informing him they had been appointed as external administrators. Mr Kingston told senators at the financial technology hearing in Melbourne on Thursday morning that Sargon had 200 staff globally, and was helping drive “impactful and long-­lasting change” across Australia’s super industry.

“While I have been CEO of Sargon for a number of years, my roots are in software development and engineering,” Mr Kingston told the committee. “I’ve always worked for myself, and while I’ve founded, grown and exited a diverse range of businesses, the consistent theme between each is simple. I’ve seen an opportunity in a maturing market with primitive technology.

“Sargon is a financial technology infrastructure company that provides trustee and supervisory services to leaders in superannuation, investment and advice markets. Our technology and expert team navigate regulatory complexity to deliver efficiencies, improve compliance and scale, lower costs, reduce systemic risk and ultimately help to improve investment outcomes.”

Sargon has “over $55bn in assets under trusteeship and supervision,” he added.

Mr Kingston told The Australian in an interview later on Thursday that the appointment of an external administrator came as a surprise.

“It’s not a significant balance,” he said, “in terms of the overall value of the company.

“This is a disappointing development and we’re working extremely quickly to get a desirable resolution for all parties.

“It really is a surprise.

“It’s not something that’s been bubbling up for a long time.

“The technology, the client pipeline, is in such a great position, so it’s disappointing timing.”

Sargon was founded by Mr Kingston and his co-founder Aron D’Souza in 2015, and formerly counted mysterious US tech billionaire Peter Thiel as an early investor.

Mr Thiel was the co-founder of PayPal and currently is a director of Facebook.

Mr D’Souza, an Australian law graduate, and Mr Thiel worked together along with the famous wrestler Hulk Hogan to take down the Gawker media empire.

Mr D’Souza masterminded Hulk Hogan’s legal case against Gawker, which resulted in a $US140m judgment in the wrestler’s favour.

In an interview with The Australian in 2018, Mr Thiel compared Mr D’Souza’s work with the Gawker case to his work with Sargon.

“The Gawker case, with all these different legal avenues, it was a very complicated chess board,” Mr Thiel said. “And something like that is also true of Sargon being a successful business. You need to know things about hiring people, the market, where the trends are going, how to financially structure things. It’s very interdisciplinary.”

McGrathNicol confirmed to The Australian that its partners Jason Preston and Shaun Fraser have been appointed a receivers of Sargon Capital Pty Ltd, Trimantium Capital Funds Management Pty Ltd and Trimantium Investment Management Pty Ltd.

It said the receivership did not apply to Sargon’s operating companies.

It said the receivers were now “in discussions with the directors in relation to progressing a review of the group”.

The Hong Kong-based Taiping Trustees, which appointed the receivers, had entered into a $36m financing arrangement with Sargon in early 2018, according to documents lodged with the securities regulator.

The collapse has also raised major questions for ASX-listed listed super administration company OneVue, which put its shares into a trading halt on Thursday morning.

OneVue is owed $31m by Sargon Capital following its purchase of super trustee company Diversa last year. Sargon Capital reached a deal with OneVue last July to buy super trustee services company Diversa in a deal worth more than $40.

But OneVue announced in November last year that it had agreed to amend the terms of its share purchase agreement with Sargon allowing it to pay $12m upfront last year with another $31m to be paid by the end of May this year.

Announcing the deferred payment, OneVue chief executive Connie Mckeage said OneVue had given Sargon additional time to pay the rest of the price “in light of recent conditions in the Australian equity market.”

She said the deal was also aimed at “ensuring Sargon has enough financial flexibility to grow alongside OneVue and their other clients.”

She said Sargon continued “to be an important partner” for OneVue “and we are looking forward to exploring new opportunities for strengthening our commercial relationship over the next few months”.

Sargon’s receivership follows a string of purchases by the company including Diversa last June for $43m, New Zealand trustee company Heritage Trustee Company in December 2018 and IOOF’s corporate trust business AET Corporate Trust in September 2018 for $51.6m.

One Sargon subsidiary, Tidswell, is the trustee company for millennial superannuation provider Spaceship.

Sargon also bought the Madison Financial Group in April 2018, rebranding it as Sargon Adviser Services from last year.