There are broader implications for ASIC's failure in a federal court case against liquidator Jason Bettles which alleged he was involved in the illegal phoenixing of collapsed property investment advisor Members Alliance Group. The relevant judgment can be read here.
Why this case matters is because ASIC was taking action against the liquidator for effectively facilitating and/or being involved in the phoenixing of the companies. The judgment illustrates the very real challenges both procedurally and from an evidentiary basis that ASIC faces in pursuing phoenixing and in particular the alleged involvement of insolvency practitioners in it.
So what?
Well, the excellent podcast on the Plutus Tax Fraud on the Fin podcast gives a detailed overview of how the $106M fraud was perpetrated.
A critical element of the fraud according to David Marin-Guzman and Neil Chenoweth was the use of second tier companies which siphoned funds and then were phoenixed once they risks attention of the ATO or exposure, into new unrelated companies to continue the fraud. Can this type of phoenixing occur without the facilitation of Insolvency Practitioners? A point made by Marin-Guzman and Chenoweth was that illegal phoenixing was in the 'too hard' basket and the type of investigation required to unearth let alone prove the fraud was not being directed to such activity, reducing the likelihood of such a fraud being exposed. If the perpetrators hadn't lived so large then it may have gone undetected for much longer.
Why is it in the 'too hard' basket?
Because of the difficulties in proving cases against liquidator for alleged involvement in phoenixing - aptly illustrated by the decision of Justice Markovic in the Bettles case.
ASIC failed because it was unable to prove the requisite knowledge by Bettles of key facts, which in turn were required to establish his 'involvement' under the Corporations Act in the contravention of the Act by others. Involvement is always difficult and technical to prove. In phoenixing cases, where direct evidence is limited and inferences are asked to be drawn based on presence at meetings and activities that follow them, it is even harder.
ASIC's media release is below.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-225mr-federal-court-case-against-liquidator-dismissed
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