David Fairfull, the co-founder and former CEO of AI marketing startup Metigy, appeared in a Sydney court on Friday to face six charges following an investigation by the corporate regulator into the failure of the company.
The investigation by the Australian Securities and Investments Commission (ASIC) alleged that between 2018 and 2021, Fairfull provided false information about the company’s revenue and income to potential investors and used his position as a director to obtain a loan for his own personal benefit, borrowing more than $7 million from the business to buy two houses.
Fairfull has been charged with five counts of making false and misleading statements contrary to the Corporations Act, plus one count of dishonestly using his position as a company director.
Metigy was co-founded by Fairfull, a former We Are Social managing partner, in 2015 to give small businesses access to data and strategic insights normally used by marketers at major corporations.
The digital marketing startup collapsed into admistration in July 2022, just 20 months after the business raised $20 million in a Series B funding round led by Cygnet Capital.
Metigy raised a total of $27.1 million and was supposedly valued at $1 billion at one stage, but it ultimately emerged the entire business was a house of cards.
The martech startup’s backers included Regal Funds Management, OC Funds, Five V Capital, Alex Waislitz’s Thorney Investments, and CP Ventures.
The company allegedly used artificial intelligence to help the small business market, but subsequent court action revealed there was no AI in place.
The platform supposedly offered real-time data from social and digital advertising channels into easy-to-understand insights and recommendations.
Bank statements falsified
During a Federal Court investigation last year instigated by administrators Cathro & Partners, Regal Funds portfolio manager Ben McCallum filed an affidavit alleging that when he went to see Fairfull at his home in the Sydney suburb of Mosman, the Metigy boss told the investor that he’d “doctored the statements” on the company’s revenue, which claimed to be in the millions, and “the bulk of the figures are fabricated”.
The actual revenue was just above $43,000 for the year.
Questioned by Cathro’s legal team during the case, Fairfull admitted to providing false bank statements and knowing it was dishonest, but said he acted alone and used Adobe software to falsify bank statements.
His admissions cannot be used in the ASIC legal proceedings.
The Federal Court found that financial documents sent to investors by the Metigy CEO were “a charade” when the legal battle between the company and investors was settled last year.
Fairfull was declared bankrupt in November 2022.
But while running Metigy, he had borrowed more than $7.7 million from the company as a personal loan to buy two properties — a $10.5 million six-bedroom house overlooking Sydney Harbour in Mosman, and a $7.7 million rural retreat in New South Wales’ Kangaroo Valley.
He repaid $3.7 million of the loan before the startup collapsed.
Those properties were sold by Metigy’s liquidators in December 2022, making a $1.5 million profit on the Mosman house and a $1.45 million loss on the Kangaroo Valley one.
Metigy had owed millions to the Australian Taxation Office (ATO), as well as money for superannuation and payroll tax to the NSW government, as staff had faced issues with getting paid on time.
The Federal Court heard that the matter came to a head in mid-2022 when Metigy’s chief financial officer looked to seize control of the business and raise funds as the money ran out, revealing the startup’s true financial state.
Now the Commonwealth Director of Public Prosecutions will run the fraud case against Fairfull, following a referral from ASIC.
ASIC deputy chair Sarah Court said directors’ duties were “an enduring priority” for the regulator.
“Company directors play an integral role in overseeing governance in addition to both performance and compliance and as such have a responsibility to act with integrity and honesty,” she said.
The matter is expected to return to Sydney’s Downing Centre Local Court on 10 December.
