The market found itself in the dark late on Tuesday and into early trading on Wednesday morning, when Creso Pharma, a $160 million Australian cannabis company, saw its stock plummet in the wake of an AFP raid at its corporate advisory firm EverBlu Capital in Sydney in support of an ASIC probe.
Clad in suits and gloves, according to reports, the AFP raided EverBlu’s Sydney office on Tuesday morning as part of a broader investigation launched by the Australian Securities and Investments Commission into EverBlu’s possible role in boosting Cresco stock.
While ASIC has yet to confirm the nature of its investigation, declining to comment, the AFP has confirmed to Business Insider Australia that the raid took place “in support” of an ongoing investigation at the corporate regulator, which saw raids at other sites, too.
At the centre of it is thought by the market to be EverBlu executive chairman, Adam Blumenthal, who also serves as non-executive chairman and co-founder of Cresco, and has found himself and EverBlu Capital in the crosshairs before for paying influencers shares and stock options in 2018 to promote clients across the firm’s portfolio.
Blumenthal later issued a statement saying that he is taking the investigation “extremely seriously”, and that he would fully cooperate as needed.
The close ties shared by the two companies triggered a mass stock dump on Tuesday, which saw Creso shares fall by 9.6%, before the ASX halted trading on the product just after 3.30pm Sydney time as a result of the stock’s sheer trading value and the quantum of its fall.
By late Tuesday afternoon, Creso took to the market to try and revive interest among spooked investors, telling them they were not yet “able to independently verify the nature of the enquiry or determine whether the matter relates [directly] to Creso Pharma Limited”.
“The company confirms, however, that it has not been served with any notices from any regulatory body in connection with the matter,” Creso said in response to an ASX price query on Tuesday night.”
“As a result, the company does not consider there to be any basis for it to make public announcement in relation to this matter.”
Creso wasn’t alone in keeping lips sealed on the matter. Both Adam Blumenthal, and his brother Darrin — who, according to EverBlu’s website, is the firm’s only managing director — have taken vows of silence, too. Neither Blumenthal could be reached for comment.
The brothers have in recent years become renowned in Australian business circles, after they held a $7,500-a-head dinner for the now-Liberal MP Dave Sharma, where both Prime Minister Scott Morrison and Treasurer Josh Frydenberg each made cameo appearances.
Since then, they’ve also come found themselves of an alleged influencer stock-boosting scheme, which saw Assad Tannous, who goes by @AsennaWealth on social media, probed over a raft of tweets championing Creso Pharma in late 2017.
In Australia, financial advice can’t be given with the necessary education, or an Australian Financial Services Licence. Those doing so are exposed to penalties ranging from fines to prison time under the Corporations Act.
In a disclosure to the market in December 2017, Creso said that it had paid Asenna 1 million fully-paid ordinary shares for “a one-year term, to provide marketing and promotional services to potential investors.”
It was just one disclosure among a slew of other influencer activities the firm was engaged in at the time, which would later emerge as some of the earliest nefarious financial influencing efforts on social media as first-time investors flocked to the market as retail platforms appeared in droves.
The space has taken ASIC some time to reckon with. Just last week the corporate regulator issued a warning to companies working with unlicensed “finfluencers”, saying that they too could fall afoul of the law for engaging them.
ASIC Commissioner Cathie Armour urged companies to do their due diligence when engaging with financial influencers, which are becoming a bloated cohort in Australia.
“If you enter into an arrangement with someone who is carrying on an unlicensed financial services business, you may be breaching the Act,” she said.
“You may also want to understand whether the finfluencer has existing vested interests to promote other financial products and services in case there’s a conflict of interest or risks to your organisation.”
In July, ASIC senior manager Somer Taylor appeared before the MarketLit finfluencer conference to remind first-time investors about the risks of online advice.
In its most recent statement, ASIC said its review of “select finfluencers”, announced in September, is ongoing.
As meme stocks continue to dominate the investment portfolios of many Australians dazzled by the promise of quick gains, some trading platforms have started to offer their own educational materials to combat the proliferation of unlicensed advice.
Citing internal research which found one in five young investors now turn to TikTok for financial advice, Superhero founder John Winters earlier this month said: “It’s up to all of us, if we’re in this space, to be leading the way on financial literacy.”