Rangi Wyatt Stephen Savage Senior has been ordered to pay compensation of $126,214 to investors and a pecuniary penalty of $142,500 for breaching the Financial Markets Conduct Act 2013 (the FMCA). The High Court judgment follows civil proceedings brought by the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko.
The proceedings were based on a regulated public offer for the sale of shares in The Powder Shed Tokoroa Limited (Powder Shed). Mr Savage was the sole director of Powder Shed.
The High Court found Mr Savage breached the FMCA by:
- Making false or misleading representations
- Making a regulated offer without a Product Disclosure Statement (PDS)
- Accepting an application for a transfer of financial products without a PDS.
FMA Head of Enforcement, Margot Gatland, said: "The FMA brought this proceeding because Mr Savage seriously undermined the main purposes of financial markets legislation. In the FMA's view, Mr Savage's conduct was deliberately misleading. Many of his investors were first time investors with little experience in financial markets and the total harm caused was significant. Bank records show Mr Savage transferred the investors' money to his own personal bank account, and to pay debts and expenses of another company that he had incorporated.
"To date, Mr Savage has made no attempt to repay his investors despite claiming he would do so. The Court has ordered him to pay back investors via the FMA to ensure the investors receive their compensation. The FMA encourages New Zealanders to treat any offer of a financial product through social media with caution and to speak to a licensed financial adviser."
Background
The High Court found that Mr Savage made false or misleading statements from April to July 2020 in online presentations and social media videos when promoting the sale of shares in Powder Shed to potential investors.
Among the claims were that he had a suitable site, had secured a major contract, and had financial backing for the business. He also claimed a substantial dividend would be paid out in the first 12 months. None of these claims could be substantiated.
At no point during the time the offers were made was a product disclosure statement lodged or provided to investors. The High Court found that Mr Savage's failure to provide a product disclosure statement meant that investors did not have the information that would have assisted them in making a decision to invest.
More than 160 individual investors applied to purchase shares in Powder Shed. Approximately 65,000 shares were sold and issued to investors at USD$1.20 per share. Investors paid in USD or in cryptocurrency. The total amount obtained equates to approximately NZD$126,000.
Mr Savage did not engage in the proceedings and a formal proof hearing was held at the High Court in Auckland on Thursday.
Justice Downs delivered judgment immediately after the hearing, declaring that Mr Savage contravened the FMCA and ordering him to pay compensation to the investors and a pecuniary penalty to the Crown. Mr Savage is required to pay the compensation to the FMA and, in turn, by the FMA to investors.
Justice Downs also imposed a banning order for six years. It prohibits Mr Savage from:
- Being a director or promotor of an entity in NZ.
- Being in any way concerned in the management of an entity in NZ.
- Taking part in the management of an entity in NZ.
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