EverBlu chair ‘motivated by financial gain’ fined $850,000, banned from managing companies

Former EverBlu Capital chair and Creso director Adam Blumenthal has been fined $850,000 and blocked from managing companies for five years.

ASIC has accepted a court-enforceable undertaking from Mr Blumenthal.

Former EverBlu Capital chair and Creso director Adam Blumenthal has been fined $850,000 and blocked from managing companies for five years, after a court found he engaged in market rigging.

Federal Ccourt judge Angus Stewart ruled Mr Blumenthal engaged in market rigging 14 times in relation to the placing of orders for EverBlu clients to purchase shares in ASX-listed Creso, an Australian cannabis company.

As well, Mr Blumenthal breached his duties as a director of EverBlu and separately Creso — as Mr Blumenthal paid finfluencer Tyson Scholz $2m for marketing and promotional services for Creso when he was also an EverBlu client.

Mr Blumenthal also failed to disclose that his private company Anglo Menda Pty Ltd loaned more than $7m to Mr Scholz to fund his Creso shares to the EverBlu board.

The penalties are not a surprise, as Mr Blumenthal and the Australian Securities and Investments Commission had largely agreed on the terms in a peace deal.

And Mr Blumenthal will be able to maintain ownership of a financial services business.

Justice Stewart said the market rigging contraventions “were serious, deliberate, repeated and occurred over a period of around eight months”.

ASIC chair Joe Longo said the penalties are significant and should act as a deterrent.

“They are a timely reminder to directors of their obligations, including to avoid conflicts of interest, and that serious consequences are imposed for contraventions to help maintain confidence in the financial system,” he said.

The court previously heard Mr Blumenthal has tried to make amends for his mistakes and would likely be able to “reform”.  

Mr Blumenthal’s barrister, Phillip English, told the NSW Federal Court last week his client co-operated with an investigation conducted by the Australian Securities and Investments Commission and had shown contrition.

“What the defendant did when divesting EverBlu was ensure staff had contracts novated to (the) company that purchased the business. He took steps so that former staff retained employment,” he said.

“The defendant … (was) trying to make amends for his mistakes and trying to ensure they didn’t flow on.”

The regulator has previously said its investigation into Mr Blumenthal and EverBlu revealed the firm had breached its obligations under its Australian Financial Services licence.

Barrister for ASIC Gerard Craddock told the court last week there was no evidence about how much financial gain Mr Blumenthal made or what the loss to the market was.

He said Mr Blumenthal was “motivated by financial gain” and looking after his young family.

“The way the contraventions were committed and the way the methodology worked must lead to the conclusion that the motivation was at least financial gain and professional ambition,” he said.

“The latter because the defendant led EverBlu and oversaw its stockbroking business and the defendant was the chairman of Creso pharma and a large shareholder.”

His shareholding in Creso Pharma was worth $30m the court heard, and EverBlu oversaw Creso Pharma’s public offering.

Mr Blumenthal has agreed to $100,000 in litigation cost and to undertake training before re-entering the industry.

Justice Stewart initially expressed concern that Mr Blumenthal would be allowed to maintain ownership of a financial services business, but Mr Blumenthal agreed to some modifications in his undertakings to rub out the concerns.