ASIC seeks $12 million penalty for banned Mayfair 101 advisor James Mawhinney
James Mawhinney is back before the Federal Court as ASIC seeks $12million dollars in penalties.
During the Federal Court hearing over four days concluding on 5 October 2021, ASIC argued that the $12million fine was appropriate because Mawhinney ran a “Ponzi-like scheme” and misled investors in national media advertisements, claiming that the risks of Mayfair’s debenture products were comparable to bank term deposits.
If imposed, the $12million fine would be on top of the 20-year ban imposed on Mawhinney which, as we discussed in our previous article, he has appealed to the Full Court.
Combined, the penalties would be some of the harshest ever imposed on any individual following ASIC enforcement action.
Mawhinney argued vehemently against the fine sought by ASIC, claiming that it should be reduced to nil, because:
- It was a debt scheme relying on new borrowings to finance existing debts, not a “Ponzi” scheme;
- Mayfair had specific oral legal advice that ASIC requirements for retail investors did not apply to its products, and its wholesale investor model was compliant (although not reduced to writing, and the lawyers were not called as witnesses); and
- Liquidators had misunderstood Mayfair’s assets, and incorrectly deemed investments to be insolvent.
ASIC is also seeking adverse publicity orders. Mawhinney’s Counsel submitted these orders were not required because Mawhinney had had ‘more bad press than Jack the Ripper’. In response, ASIC submitted that court ordered adverse publicity carries greater weight than the opinions of journalists and served an important public purpose.
Justice Anderson reserved his judgment on penalty, which we expect will be handed down in the coming weeks. The hearing on Mawhinney’s appeal against the 20-year ban is also pending. So, watch this space.
