ASIC Blames iSignthis and Its CEO for Disclosure Failures

​The Australian Securities and Investments Commission (ASIC) announced that it has commenced civil penalty proceedings in the Federal Court against iSignthis Ltd, a RegTech solutions provider,  and its managing director and chief executive officer Nickolas John Karantzis.

According to the announcement, iSignthis failed to disclose material information in relation to three integration agreements with its three clients: Corp Destination Pty Ltd, Fcorp Services Ltd and IMMO Servis Group.

ASIC alleges iSignthis failed to disclose that in the fourth quarter to 30 June 2018, it had recognised approximately $3 million in revenue that was one-off and non-recurring.

In addition, ASIC alleges that iSignthis failed to disclose it had incurred approximately $2.85 million in one-off costs for out-sourcing services, which ASIC contends was for the supply of the integration services.

ASIC also alleges iSignthis made misleading representations about the revenues derived from the three integration agreements in an analyst briefing given by Mr Karantzis on 3 August 2018, when it stated that iSignthis' revenue for one-off or up-front fees accounted for less than 15% of the total revenue in the fourth quarter to 30 June 2018, when ASIC alleges it actually amounted to 75% of the total unaudited revenue for that period.

Furthermore, iSignthis failed to disclose that VISA had terminated its relationship with iSignthis and iSignthis eMoney Ltd, and failed to disclose the reasons for VISA's decision to terminate, which included that, according to VISA  "IsignThis is not operating appropriate programs to manage Anti-Money Laundering and Risk”.

The date for the first case management hearing is yet to be scheduled by the Court.