The Federal Court of Australia has ordered EverBlu Capital Pty Ltd (EverBlu) and former director of Creso Pharma Limited, Adam Blumenthal, to pay a fine of $850,000 and be disqualified from managing companies for five years.

The court made the above ruling after litigation brought by the Australian Securities and Investments Commission (ASIC).

On April 17, 2024, the court found that:

• Mr. Blumenthal engaged in market manipulation 14 times when placing orders for Australian Securities Exchange-listed Creso company stocks for EverBlu clients, violating his duties as a director of EverBlu by failing to adhere to EverBlu's compliance policies, resulting in EverBlu breaching its obligations as an Australian Financial Services (AFS) licensee and harming EverBlu's interests.
• He breached his duties as a director of Creso in engaging Tyson Scholz (a client of EverBlu) and another party (a major trading entity and also a client of EverBlu) to provide marketing and promotional services to Creso. Under these agreements, Creso paid Mr. Scholz over $2 million and the other party over $1.2 million without conducting adequate due diligence or imposing measurable delivery outcomes.
• Given his financial relationship with Mr. Scholz, Mr. Blumenthal's private company, Anglo Menda Pty Ltd, lent Mr. Scholz over $7 million as funds for his trading of Creso stocks, thereby failing to avoid and disclose conflicts of interest to the board, in breach of his duties as a director of Creso.

Justice Stewart considered that in this case, market manipulation misconduct and breaches of director duties "occurred simultaneously" and "involved the core of the financial system and the necessity of public confidence in the financial system." The court also stated that the market manipulation misconduct was "serious, deliberate, repeated, and lasted for about eight months," thus warranting substantial penalties.

The court also ordered Mr. Blumenthal to pay ASIC $100,000 in legal costs.

Mr. Blumenthal admitted to contravening sections 1041B(1)(b), 180(1), and 181(1)(a) of the Corporations Act 2001 and agreed to the relief proposals put forward by both parties to the court.