ASIC has been criticized for its slowness in investigating leads to potential Ponzi schemes, and in some cases has waited years to follow up on complaints.
Susan Barnett, chief executive of SR Group, appeared before the Senate Economic Reference Committee’s inquiry into ASIC and explained how individuals warned the regulator about Courtenay House years before formal action was taken.
The Courtenay House companies had assured investors that their funds would be traded on the foreign exchange and futures markets, although only a small portion of the funds traded. Instead, investors were paid monthly amounts from the capital put into a $180 million Ponzi scheme by other investors.
In May 2023, former Courtenay House builder and promoter Athan Papoulias was sentenced to two years in prison for his role. In February 2023, David Sipina was charged with felonies related to alleged misconduct at the company, and director Tony Iervasi pleaded guilty to five criminal charges in November 2022.
During the hearing of evidence, Barnett described how the victims’ concerns were ignored by the regulator. The first Courtenay House alert was issued in 2012 and a further ten were issued before ASIC took the first regulatory action in 2016.
Barnett said the complainants received no phone call, meetings or interview requests, and only received an automated response from ASIC saying it was “looking into the matter.”
“[ASIC] have become so large and unwieldy that they spend a lot of money on maintaining the ant nests. They do not do anything. If they actually take positive action, it will be disastrous for so many more people. I think the enforcement area of the regulator should be separated. They shouldn’t coexist.
“There is no link to ASIC’s ability to closely monitor incoming complaints and verify whether they are legitimate or not. There may be many complaints, but if you get ten about a company, an investigation is warranted.”
She said the viability of multiple Ponzi schemes in Australia was “devastating”. In addition to the Courtenay House scheme, there are other Ponzi schemes including one run by Melissa Caddick, City Pacific, Prime Trust and Mayfair.
“In the Mayfair case, ASIC was concerned as early as 2016 about the behavior of its director. They contacted the director’s legal representative and raised serious concerns, including the possibility that one of the companies held an Australian financial services license, the possible issuance of interest and the possible operation of unauthorized banking. ASIC did nothing and the director formed the Mayfair Group which has suffered hundreds of millions in lost investor funds.
“It should make ASIC sit up and say, ‘What’s wrong with what we’re doing as a regulator that these Ponzi schemes can cost hundreds of millions of dollars?'”
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