Former tech start-up GetSwift and three directors have been hit with more than $18 million in penalties for adopting an "unlawful public-relations-driven approach" to attracting investor funds.
In a judgment delivered on Thursday, Federal Court Justice Michael Lee was scathing of the firm's conduct, in which contracts with companies such as Amazon, Commonwealth Bank of Australia, and Yum! Brands - which owns Pizza Hut and KFC - were hyped up through Australian Securities Exchange announcements.
"To adapt the famous remark of Ted Heath, (GetSwift) and those primarily responsible for its wrongful conduct, could be described as representing the unacceptable face of start-up capitalism," he wrote, referring to a former UK prime minister.
From December 2016, it used these inflated announcements to attract $104 million in investor capital through two share placements.
"It became a market darling because it adopted an unlawful public-relations-driven approach to corporate disclosure instigated and driven by those wielding power within the company," Justice Lee wrote.
GetSwift itself, which is now in liquidation, was hit with a penalty of $15 million, concluding a long-running lawsuit by the Australian Securities and Investments Commission.
Justice Lee said this amount matched the objective seriousness of the firm's past conduct, which he described as "insidious" and "tricky", and would act as a deterrent for other companies considering taking the same path in future.
"The contraventions were serious, serial and at the heart of GetSwift's culture," the judge wrote.
Its former executive chairman and CEO Bane Hunter was fined $2 million and disqualified from managing corporations for 15 years. Managing director and former-AFL player Joel Macdonald was fined $1 million and disqualified for 12 years.
"Mr Hunter is a man who is presently wholly unsuited to be in a position of responsibility in a public company," Justice Lee said.
"Mr Macdonald has little understanding or regard for his legal obligations as a director, when they get in the way of pursuing a strategy to make money."
Solicitor and non-executive director Brett Eagle was fined $75,000 and disqualified for two years for his involvement with the firm.
After Justice Lee found GetSwift and its directors had misled the market and breached corporate law multiple times in November 2021, the firm convinced another Federal Court judge to allow it to redomicile to Canada, moving from the ASX to the NEO Exchange.
In return, the firm promised it would not wind up its Australian operations and would indemnify its Australian subsidiary in relation to any penalties imposed or compensation the court found owed to a separate class action filed against it.
That promise was "not worth the paper it was written on" with the firm then entering voluntarily liquidation in July 2022," Justice Lee said.
"It is to ASIC's credit that regulatory action has been taken, but it is a pity that what was happening at GetSwift was not stopped sufficiently quickly, and assets were not preserved, so as to minimise the loss now visited upon the hapless investors," he said.
Neither Mr Hunter nor Mr Macdonald appeared to defend themselves in a penalty hearing held in January with only Mr Eagle turning up.
"After putting ASIC to proof in every aspect of its intricate case and requiring expenditure of vast public resources, neither Mr Hunter nor Mr Macdonald have shown the slightest degree of remorse or contrition, nor have they made any acknowledgement they behaved improperly," Justice Lee wrote.
Mr Hunter, Mr Macdonald and Mr Eagle were jointly ordered to pay ASIC's costs of the proceeding.
