A director involved in the reverse listing of Weebit Nano Ltd (ASX: WBT) has been sentenced to 12 months jail for illegal market manipulation.
Ananda Kathiravelu of Perth had in August pleaded guilty to conspiracy to commit an offence of market manipulation.
On Monday, the Supreme Court of Western Australia sentenced him to 12 months imprisonment. He was released on $10,000 recognisance for 7 months of good behaviour.
Kathiravelu was a director of Radar Iron Limited, an iron ore mining company listed on ASX with the ticker RAD, that in 2015 was losing money and had near-zero revenues.
In July 2015, he was introduced to Israeli businessman Ariel Malik in connection to a potential reverse listing of technology firm Weebit Nano.
Later that year, Radar Iron agreed to acquire Weebit Nano, but a condition of the transaction was that a $5 million capital raising took place.
The raise would be conducted by Armada Capital, where Kathiravelu was also a director. It was set to receive up to $600,000 in fees if the capital raise was successful to the maximum extent.
The Australian Securities and Investments Commission’s attention piqued when Radar’s share price increased, making it more attractive to entice investors into the capital raise.
Investigations later found the share price was artificially pushed up.
WhatsApp messages show the conspiracy
The court judged that WhatsApp messages between Kathiravelu and Malik showed them manipulating the market.
“Can we get Magic to buy some rad next week. I’m running out of bullets!” texted Kathiravelu to Malik on 12 May 2016.
‘Magic’ is the nickname of Croatian-Canadian businessman Steven Marko Bajic.
“Sure… will make sure he will,” replied Malik.
Kathiravelu emphasised he wanted Radar Iron shares to close at 5.2 cents on Tuesday 17 May 2016.
Further WhatsApp correspondence showed that Bajic bought up Radar Iron shares in the last hour trading on Tuesday 17 May 2016. The stock price indeed closed at 51 cents before it was placed in a trading halt.
Malik, who was named as an alleged co-conspirator, and Bajic both live overseas and have not been charged with any offences.
The Motley Fool has contacted Weebit Nano for comment.
Market manipulation is a serious offence
Although Kathiravelu eventually pleaded guilty, he did so after previously pleading not guilty in a “significant number” of previous appearances in court.
He had faced a maximum penalty of 10 years in jail and a fine up to $810,000.
“You did not cooperate with law enforcement authorities in the investigation of your offence,” stated Justice Anthony Derrick.
“The detection of your criminal conduct was not the result of any voluntary disclosure or cooperation on your part.”
Due to the conviction, ASIC has also automatically banned Kathiravelu from managing companies for 5 years.
“Market manipulation erodes public confidence in the fair, orderly and transparent operation of the market,” ASIC commissioner Cathie Armour said.
“ASIC will take action against misconduct which undermines the fairness and integrity of our financial markets.”