Adam Blumenthal ordered to pay $850k

The Federal Court has ordered former director of EverBlu Capital and Creso Pharma Adam Blumenthal to pay $850,000 and be disqualified from managing corporation for five years for market rigging and breaching director duties.

The court found Blumenthal had engaged in market rigging on 14 occasions in relation to placing orders for EverBlu clients to purchase shares in Creso.

The court determined Blumenthal had breached his duties as a director of EverBlu by failing to comply with its compliance policies and causing it to breach its obligations as an Australian financial services (AFS) licensee which jeopardised its interests.

Blumenthal also breached his duties as a director of Creso by paying Tyson Scholz - who was a client of EverBlu - more than $2 million to provide marketing and promotional services for Creso.

In addition, Blumenthal paid another party a further $1.2 million for the same purpose "in the absence of sufficient due diligence or imposing measurable deliverables".

The court said Blumenthal also failed in his duties as a director of Creso by failing to avoid and disclose to its board a conflict of interest, given his financial relationship with Scholz, in which Blumenthal's private company, Anglo Menda, had lent more than $7 million to Scholz to fund his trading in Creso shares.

"The contraventions are interrelated. They each had their source in Mr Blumenthal's large shareholding in Creso, his position as the chairman of a financial services licensee with a capacity to employ trading strategies, and his intention of presenting a false or misleading picture to the market for Creso shares," Justice Stewart said in his judgement.

"The contraventions concerned fundamental obligations by a senior officeholder in each corporation and, in the case of EverBlu, a senior officeholder who oversaw and participated in the stockbroking services that it provided."

ASIC chair Joe Longo said the penalties imposed by the court were significant and should act as a deterrent to engaging in market misconduct.

"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," Longo said.

The court also ordered Blumenthal to pay $100,000 towards ASIC's costs of the proceeding.