ASIC launches criminal action against Opes Prime directors

The Australian Securities and Investment Commission has brought charges against the leaders of the Opes Prime margin lending and broking business that collapsed spectacularly in 2008, triggering chaos on the Australian sharemarket.

Julian Smith, 47 was arrested on Friday and appeared in the Downing Centre Local Court, while Anthony Blumberg, 42, was arrested yesterday and appeared in the Melbourne Magistrates Court.

A third director, Laurie Emini, was charged on summons and will appear with his co-accused on January 29 in the Melbourne Magistrates Court.

Central to the charges is a loan made by ANZ to Opes Prime. ASIC alleges that shortly before Opes Prime collapsed, the directors signed financial documentation with ANZ Bank to obtain the loan and pledged the Opes Prime’s assets as security to meet the obligations of a third company, Leveraged Capital Pty Ltd.

“ASIC alleges that in doing so, the directors were intentionally dishonest and failed to exercise their powers and discharge their duties in good faith in the best interests of [Opes Prime],” ASIC said.

“It is further alleged that Messers Emini, Smith and Blumberg dishonestly used their position as directors… with the intention of directly or indirectly gaining an advantage for themselves or for someone else.”

Each offence carries a maximum penalty of five years imprisonment.

The collapse of Opes Prime heralded the start of the global financial crisis for many Australians. The company, which pioneered an aggressive margin lending model whereby investors could borrow money against virtually any shareholding they had, was placed into administration in March 2008 owing clients and its lenders, including ANZ and Merrill Lynch, around $630 million.

Under the Opes business model, clients handed over legal title to their shares in return for loans, which meant that ANZ and Merrill Lynch took control of the shares and started selling them up.

A large number of entrepreneurs in small and medium-sized companies lost shares in the collapse, including former Destra founder Domenic Carosa and Paul Choiselat, a prominent investors in a number of companies including Jumbuck Entertainment.

Last year, ANZ and Merrill Lynch agreed to a $253 million settlement to partially compensate clients, and ANZ also gave ASIC enforceable undertakings that it would improve its risk management procedures.