Guvera’s well-publicised woes are worsening. The Australian Securities and Investments Commission has sent a letter to the Institute Of Public Accountants expressing concerns about the kind of fundraising methods allegedly used by the busted streaming music business and the messaging app Kwickie which, until recently, Guvera had equity in.
According to The Courier-Mail, the corporate watchdog outlines a process where accountants advise their clients, some of whom are “unsophisticated investors” or folks inexperienced in the machinations of high-risk business, to set up a trust which is then run by a third party, possibly the accountant themselves. Because that person running the trust meets the “sophisticated investor” test (someone with a gross income of more than $250,000 or net assets of at least $2.5 million), they can, by law, pursue grassroots funding without providing extra documentation.
ASIC says it’s “concerned that this structure is being used in an attempt to circumvent the prohibition on offering shares to non-sophisticated investors without a disclosure document,” and it wants the loophole closed, according to the letter.
Guvera’s tale was one of a start-up with massive ambitions, which crashed and burned its way through a mountain of cash. After nine years of operations, the Gold Coast-originated business raised $185 million from about 3,000 private investors and was rejected for an IPO. The business was spending $6.6 million a year and many investors want to know where their money went.
ASIC’s letter to the Institute Of Public Accountants follows its probe which focuses on alleged commissions and other fees paid to accountants for referring their clients to a Guvera-linked investment company, AMMA Private Equity, according to the ABC.
AMMA had helped on fundraising for various startups and is said to have offered inducements to accountants participating in the creation of intermediary trusts.
In its new letter, ASIC said it was “concerned that Amma is utilising a network of accountants” in questionable fundraising tactics.