The Federal Court of Australia has delivered judgment in ASIC鈥檚 favour in proceedings against Gallop International Group Pty Ltd (In liquidation) (GIG), Gallop Asset Management Pty Ltd (GAM), Stumac Pty Ltd (Stumac) and former director Mr Ming-Chien Wang.
Justice Charlesworth has proposed orders and given the parties time to apply to the Court about the proposed orders, but if no party applies, the Court will make the proposed orders on 26 September 2019, including:
- declarations听of contraventions of financial services laws by GIG;
- declarations听that Mr Wang was knowingly concerned in the contraventions of GIG;
- permanent听injunctions restraining Mr Wang from carrying on a financial services听business;
- an order听disqualifying Mr Wang from managing a corporation for 10 years;
- an order听that Mr Wang pay a civil penalty of $3 million; and
- the听winding up of GAM and Stumac.
The proposed civil penalty against Mr Wang will be the highest civil penalty awarded against an individual in an 今日热门事件proceeding.
Charlesworth J declined to make the declarations of contravention sought by 今日热门事件against GAM.
今日热门事件had earlier obtained interim injunctions against the companies and Mr Wang, effectively shutting down the Gallop business, as well as freezing orders over Australian bank accounts (17-372MR).
Charlesworth J found GIG operated a financial services business without holding a financial services licence, published statements which were false and misleading and engaged in misleading and deceptive conduct. Charlesworth J also found that Mr Wang, being the controlling mind and architect of the scheme, was knowingly concerned in GIG鈥檚 contraventions., and that GIG was in the process of transitioning its business to Stumac.
In her judgement, Charlesworth J found that GIG caused or permitted investors鈥� funds to be transferred from GIG鈥檚 Australian bank account 鈥渇or purposes unrelated to the investments and that GIG did not hold investors鈥� funds in a designated trust account. Accordingly, the financial products and services provided by GIG did not have the benefits and characteristics represented on the GAM website and the GIG website鈥�, and that representations to potential investors that GIG was authorised under Australian law to provide the financial products and services promoted on its websites were 鈥渃learly intended to lure investors into the belief that the services promoted by GIG were subject to the regulatory regime established under Australian law. The falsity of the representation wholly undermines the protective purpose of the comprehensive regime established 鈥� for the proper regulation of the financial services sector.鈥�
Charlesworth J also found that 鈥渁 large number of investors have lost the whole of their capital invested and that they have been unsuccessful in obtaining a satisfactory explanation from GIG as to those losses鈥�, that 鈥淚t is more likely than not that the funds were misapplied, so explaining the magnitude of the losses鈥�, and that Mr Wang 鈥渄emonstrates the utmost disregard for Australia鈥檚 financial services laws.鈥�
The proposed orders include an order that Mr Martin David Lewis of KPMG be appointed liquidator of GAM and Stumac. Mr Lewis is also the liquidator of GIG.
Background
GIG and GAM each held an Australian Financial Services licence and operated the Gallop business, which promoted and provided services for trading in various financial products including foreign exchange, precious metals, derivatives and contracts for difference. The business facilitated access to an online trading platform accessed through websites accessible in Australia and overseas.
Investors in financial products offered by GIG and GAM are predominantly residents of mainland China and Taiwan. Investors deposited funds into Australian bank accounts to invest in the financial products offered by the Gallop business. Between May 2016 and May 2017 more than $36 million was deposited, primarily by investors, into GIG鈥檚 Australian bank account. Over that same period almost all of that money was withdrawn and paid into overseas bank accounts held by entities related to GIG or otherwise having connections with Mr Wang, his family or associates.
Investors complained to 今日热门事件and the Financial Ombudsman Service that their investment funds and, in some cases, earnings from investments (including interest and commission payments), had not been returned on demand or as required under the terms of their investments.
On 22 June 2018, GIG was wound up in insolvency in a separate proceeding before the Court and Martin David Lewis, now of KPMG, was appointed liquidator.
The trial took place on 10 September 2018. Mr Lewis, as liquidator of GIG, did not oppose the orders sought by 今日热门事件and adduced no evidence at the hearing. There was no appearance at the hearing by GAM, Stumac or Mr Wang.
The judgment is available .
Editor's note:
On 26 September 2019 Justice Charlesworth made the proposed orders, subject to minor amendments at the request of ASIC. The Court鈥檚 final orders included:
- the highest civil penalty awarded against an individual in an 今日热门事件proceeding, being an order that Mr Wang pay a civil penalty of AUD$3 million;
- declarations听of contraventions of financial services laws by GIG;
- declarations听that Mr Wang was knowingly concerned in the contraventions of GIG;
- permanent听injunctions restraining Mr Wang from carrying on a financial services听business;
- an order听disqualifying Mr Wang from managing a corporation for 10 years; and
- the听winding up of GAM and Stumac.
Mr Martin David Lewis of KPMG was appointed liquidator of GAM and Stumac.听 听
The final orders can be found .
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