ASIC in chase on $17.8m Nuix insider trading probe

The corporate regulator has succeeded in having the brother of Nuix’s former top finance exec banned from leaving the country.

The corporate regulator is closing the net around an alleged $17.8m insider trading case at the troubled tech player Nuix after launching a bid to ban a key figure who was under investigation from leaving the country.

In a hearing on Tuesday a court ordered that a travel ban on the brother of a former top executive at Nuix – Ross Doyle – be put in place until at least October 25 given the regulator feared he was about to leave for Switzerland where he would be out of reach.

Ross Doyle is the brother of former Nuix chief financial officer Stephen Doyle, who was dismissed from the company on June 15. The Doyles’ father Ronald Doyle is also under investigation.

No charges have been brought against the Doyles.

An Australian Securities and Investments Commission spokesman said the regulator launched the court action on Tuesday to ensure Ross Doyle “remains within the jurisdiction to assist with ASIC’s investigation”.

“These orders were extended by the Federal Court today until 25 October 2021. As ASIC’s investigations are ongoing, we do not propose to comment further,” he said.

Nuix chair Jeffrey Bleich said on Wednesday the company was “genuinely disturbed by the allegations” and would “fully assist ASIC in getting to the bottom of that matter.”

Nuix said it had also come to understand that ASIC’s Financial Reporting and Audit

Enforcement Team had begun a separate investigation into the affairs of Nuix - specifically

contraventions of the Corporations Act in relation to financial statements and its IPO prosepectus. It said it was fully committed to cooperating.

Court documents reveal ASIC last week applied for a secret order to prevent his travel in June amid fears Ross Doyle would discover he, his brother Stephen Doyle, and father Ronald Doyle, were all subject to investigation.

In an affidavit ASIC senior lawyer Jenny Truong said in addition to the insider trading case the regulator was also looking at whether Stephen Doyle issued a prospectus which contained “false or misleading” information about the forecast revenue of Nuix for the financial year ending 30 June 2021.

The hearing on Tuesday - which was aimed at extending the travel ban - comes just days after ASIC investigators backed by Australian Federal Police Officers raided Nuix’s Market Street office in Sydney’s CBD, Mr Doyle’s Pyrmont apartment, and Ross Doyles and Ronald Doyles holiday location in Queensland.

At the time Nuix said in a market update the raids were “seeking documents in relation to an investigation into the affairs of an individual” and did not note the connection with its prior CFO.

According to documents filed with the Federal Court, ASIC alleges the brothers engaged in a complex series of transactions of shareholdings in Nuix to overseas entities, with that information not disclosed to Nuix shareholders.

ASIC also alleges Ross Doyle sold 2m shares in Nuix ahead of one of the company’s profit downgrades this year, reaping a windfall gain of $17.8m.

ASIC alleges the sale would only have netted approximately $12.1m if the shares had been sold after the earnings warning had come to light.

The profit warning on February 26 saw Nuix shares tumble 32.44 per cent from the previous close.

ASIC alleges Nuix also failed to properly report the shareholdings of its former chief financial officer Stephen Doyle, noting the sale of 50,000 shares to Ross Doyle in 2015 - before the company listed - and this was not reflected in internal documents.

The deal would see Ross Doyle ultimately gain 2m shares in Nuix after a 50:1 share split in 2017 of his remaining 40,000 shares.

“In August 2018 Nuix Shareholder Macquarie Group produced an internal document indicating that Stephen Doyle continued to own the 50,0000 Nuix shares that were split into 2m shares,” Ms Truong said.

As Nuix was set to list in December 2020 Ross Doyle would transfer those 2m shares to a corporate entity called Black Hat, before transferring 200,000 back to himself just days before liquidating the massive holding.

ASIC alleges although the shares were sold by an entity linked to Ross Doyle and that former Nuix CFO “Stephen Doyle was one of the beneficial owners of both the 1.8m shares held in the Black Hat Trading Account and the 200,000 shares held in the Ross Doyle Trading Account”.

ASIC’s documents allege the Doyle brothers were seeking a quick sale of the Nuix holdings, taking an offer for 1.54m shares on February 12 below the market price.

The sale saw the sellers miss out on as much as $464,067 in potential gains that were available had they split the transaction over more days.

The allegations hold a potential penalty of 15 years jail or almost $17.1m in penalties.

Court documents note most of the proceeds of the share sales had been sent to Liechtenstein or Switzerland, although some $400,000 had ended up in the hands of Ronald Doyle, the father of the two men.

Ronald Doyle on Tuesday did not respond to requests for comment.

Lawyers for ASIC told the court the regulator was concerned Ross Doyle was seeking to get out of Australia and back to Switzerland.

“I believe Ross Doyle is actively seeking to leave Australia for Switzerland and that he will not return to Australia in the near future if he is allowed to depart for Switzerland,” Ms Truong said.

She noted Ross Doyle had applied to leave Australia on June 9 and had scheduled a flight to leave Australia on June 27, just days before ASIC would launch its raids.

The orders required Ross Doyle to submit “all passports and other documents permitting international travel in his name” to the court.

Documents reveal Ross Doyle holds a significant shareholding in Haventec, which currently shares office space with Nuix in its Sydney Headquarters.

Haventec has been linked to former Nuix executive Tony Castagna, who reaped an $80 windfall from the listing of Nuix in December.

Mr Castagna was cut from the business on May 28 after details of his links with the business were made public.

Ross Doyle lists his current role as managing director and co-founder of a renewable energy company GRID Power.

“My strategic and commercial insight in areas like capital raising, performance management, business turnarounds, IPO, merger and acquisition, extensive change management, and business disposal, has helped companies grow, thrive and better position themselves for the future,” he says on his LinkedIn profile.

Meanwhile, property documents show Stephen Doyle and his wife Liza Choa-Doyle spent $4.6m on their luxury four bedroom, four bathroom apartment in the inner Sydney suburb of Pyrmont the day Nuix listed on the ASX.