David Paul Hodgson disqualified for unlicensed financial services and misleading statements

The Federal Court has disqualified Queensland director David Paul Hodgson from managing corporations for five years and permanently restrained him from engaging in financial services without an Australian financial services licence in an action brought by ASIC against Mr Hodgson and Paladin Group companies MacroLend Pty Ltd and Great Southland Limited, of which Mr Hodgson is the sole director.

The Court found Mr Hodgson, MacroLend and Great Southland each conducted an unlicensed financial services business between 2015 and 2023. This was of significant concern to ASIC as MacroLend and Great Southland raised around $109 million from investors during this time.

The Court also found that Mr Hodgson and MacroLend engaged in very serious misleading or deceptive conduct in claims they made in material provided to investors for investments in another company in the Paladin Group, Kradle Software Pty Ltd.

Mr Hodgson and MacroLend made a misleading claim that Kradle Software held intangible assets of $1.02 billion when the balance sheet of Kradle Software recorded intangible assets of only $11,180. The Court found Mr Hodgson's valuation of $1.02 billion was 'entirely fanciful'.

In addition, Mr Hodgson and Macrolend made misleading claims that Macrolend would use substantially all of the funds obtained from investors to grow Kradle Software and that the Kradle Software product would achieve a public listing on an overseas stock exchange.

Great Southland, a Belize registered entity, was found by the Court to have been operating unlawfully in Australia while unregistered for more than six years.

ASIC Deputy Chair Sarah Court said, 'This type of misconduct undermines trust and confidence in Australia's financial services.

'Firms dealing in financial products have an obligation to be licensed which ensures customers are afforded key legal protections provided by an Australian financial services licence.

'ASIC took this action as it was concerned about the misrepresentations made by Mr Hodgson and MacroLend, which included making misleading or deceptive claims about investing in Kradle Software.'

In finding Mr Hodgson's conduct 'very serious', Justice Sarah C Derrington said, 'The requirement to hold an AFSL to carry on a financial services business is an important part of the regulatory framework for the protection of investors and that 'Mr Hodgson adopted a laissez-faire approach to compliance with the financial services law'.

Mr Hodgson, MacroLend and Great Southland were ordered to pay ASIC's costs.

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Judgment

Background

MacroLend and Great Southland form part of a larger group of companies known as the Paladin Group. There is a sub-group of companies within the Paladin Group known as the Corearth Group. The Corearth Group included Corearth Holdings Pty Ltd and Kradle Software. Corearth Holdings owns all shares in Kradle Software.

Mr Hodgson is also a director of Corearth Holdings and Kradle Software.

In July 2015, Mr Hodgson was banned from providing financial services for two years due to his involvement in the conduct of Exalt Global Funds, a company of which he was a director, and which made false statements in investment disclosures.

In February 2024, ASIC commenced proceedings in the Federal Court against Mr Hodgson, MacroLend Pty Ltd and Great Southland Limited (24-024MR).