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Finance outfit ordered to refund millions to exploited Guvera investor
By Chris Cooke | Published on Thursday 9 August 2018
The Australian finance outfit which raised money for failed streaming music platform Guvera has been ordered to refund one investor his entire $6.6 million investment. This is after a judge concluded that Amma Private Equity manipulated a man with Alzheimer’s so that he spent millions on Guvera shares which were “at all times worthless”.
Amma was sued by 80 year old Keith Messer last year, following the final collapse of the Guvera company, that had been in freefall since a disastrous attempt at an IPO a year earlier.
The lawsuit stated that Messer had started investing in Guvera after meeting with Amma reps in 2012. He was diagnosed with Alzheimer’s disease the same year and the illness then “progressed significantly”, to the extent – lawyers argued – that Amma officials should have noticed that their investor was now struggling to comprehend the complexities of the investments he was making.
Messer’s daughter also claimed to have met with Amma in 2014 to advise the investment firm of her father’s condition. She also told them that he “did not understand the investments, he had no paperwork … and that he did not wish to further invest in Guvera”. But, it was then claimed, Amma secured a number of further investments from Messer in the following eight months.
Defending itself last year, Amma insisted that Messer “confirmed that he understood the nature of the music streaming application and the business model of Guvera” and that he “asked detailed questions about the investments which indicated that he understood the nature and risks associated with purchasing the shares and [that he] had researched [Guvera’s] business model”.
However, according to Financial Review, in a recent judgement in the Australian federal court, judge Jennifer Davies ruled that Amma acted “unconscionably” when it persuaded Messer to invest millions into the Guvera business. This was a “speculative venture”, the judge added, and the shares he bought were “at all times worthless”.
Davies said that it should have been obvious to Amma’s representatives that Messer had a significant cognitive impairment. All the more so after his daughter’s intervention. Instead of acknowledging Messer’s condition and his daughter’s concerns, Amma’s rep “consciously and deliberately” put pressure on him to invest more money, acting in a way that was both “exploitative and manipulative”.
The judge also criticised Amma for being deliberately vague about the status of the Guvera business as Messer was investing further monies. The judge said Amma’s rep said the business was doing very well, when in fact an independent auditor had said there was significant uncertainty about the company’s future. Given Amma’s close affiliation with Guvera – it is headed up by a co-founder of the streaming firm – the judge added, Financial Review reports, “that it was reasonable to infer Amma was aware of Guvera’s poor financial position”.
Although there were specific circumstances in Messer’s case that led to the litigation, there has been more general criticism of the way Amma raised money for the Guvera venture, especially off unsophisticated investors introduced to the investment outfit by their accountants. Indeed, after Guvera’s collapse, the Australian Securities And Investments Commission sent a letter to the country’s Institute Of Public Accountants expressing concerns about the kind of fundraising methods allegedly used by Amma to raise monies for the streaming music company.
Amma is yet to respond to the judgement in the Messer case.
