Federal Court of Australia

Australian Securities and Investments Commission v Guo [2024] FCA 125

ORDERS

PENAL NOTICE

THE COURT ORDERS THAT:

1.    At the first instance, service of the Originating Process dated 19 February 2024 be dispensed with.

2.    The plaintiff serve on the defendant the Originating Process dated 19 February 2024, the affidavit of Anita Das affirmed on 19 February 2024, the submissions of the plaintiff dated 19 February 2024, a transcript of the hearing held in this proceeding on 20 February 2024 and a copy of these orders, as soon as practicable.

3.    The Originating Process dated 19 February 2024 be returnable before the Commercial and Corporations Duty Judge at 10:15am on 27 February 2024.

4.    Until further order, or 20 August 2024, whichever is earlier, pursuant to s 1323(1)(k) of the Corporations Act 2001 (Cth) (the Act), the defendant be restrained from leaving or attempting to leave Australia.

5.    Pursuant to s 1323(1)(j) of the Act, the defendant deliver up forthwith, to the Registry of this Court:

(a)    all passports held by him, or otherwise in his possession, custody or control; and

(b)    any copy in his possession, custody or control of any application in his name for a passport, replacement passport or other document permitting international travel made to the authorities of any country on or after the date this order enters into effect.

6.    The documents delivered up to the Registry pursuant to Order 5 above be held by the Registry until 20 August 2024, or until further order, whichever is earlier.

7.    Until further order, or 20 August 2024, whichever is earlier, the defendant be restrained from applying for the issue of an Australian or non-Australian passport or other document permitting international travel.

8.    In the event that the defendant cannot locate any passport or other document permitting international travel, he promptly:

a.    notify, in the case of a foreign passport or travel document, the relevant authority responsible for the issue and control of such passports or travel documents, confirming that he has lost his passport or travel document; and

b.    file and serve an affidavit stating that fact and exhibiting a copy of the above notification sent.

9.    To the extent necessary, the plaintiff has leave to give to the relevant authorities that issue and control passports, notice of these Orders, by delivering a copy of these Orders to a person apparently in the employ of that entity or person.

10.    In addition to personal service effected pursuant to Order 2 above, the plaintiff is to provide the documents referred to in Order 2 above to the defendant by means of electronic communication to the following email address: alan68735606@hotmail.com

11.    Liberty to any party to apply to the Commercial and Corporations Duty Judge on reasonable notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

BUTTON J:

Introduction

1    By originating application filed on 19 February 2024, the plaintiff, the Australian Securities and Investments Commission (ASIC), sought interim orders pursuant to ss 1323(1)(j), (k) and 1323(3) of the Corporations Act 2001 (Cth) (Corporations Act) restraining the defendant, Mr Liang Guo, from leaving Australia and requiring Mr Guo to surrender any passports held by him to the registry of the Court, amongst related and ancillary orders.

2    The application was first made returnable before me on an ex parte basis as the Commercial and Corporations Duty Judge on 20 February 2024.

3    The plaintiff relied on an affidavit of Anita Das, affirmed on 19 February 2024. Ms Das is a senior manager at ASIC. She is employed in the Enforcement and Compliance Department. Ms Das deposes to various matters, including the fact that, on 16 January 2024, ASIC commenced an investigation into suspected contraventions of ss 180–184 of the Corporations Act by Mr Guo. Those contraventions are thought to arise from Mr Guo’s conduct as a former director of Blockchain Global Limited (Blockchain Global) in the period from January 2016 to December 2019.

4    ASIC made it clear in advancing its application that the orders it was seeking were merely interim orders. ASIC advised the Court that it anticipates that a more substantive hearing will occur, once Mr Guo has been served with the papers. To that end, the orders that I made at the first return of the application provide for the matter to return before the Commercial and Corporations duty Judge in one week’s time.

Background

5    In around mid-2017, Blockchain Global commenced operating a cryptocurrency exchange platform known as the ACX Exchange, which allowed customers to buy, sell and store cryptocurrency. In operating that exchange, Blockchain Global received funds and cryptocurrency from ACX Exchange customers for the purpose of trading on that exchange.

6    In December 2019, ACX Exchange collapsed and customers were unable to withdraw their funds. Blockchain Global appointed voluntary administrators on 19 October 2021, and on 11 February 2022, liquidators were appointed. The liquidators have made substantial reports, the first report being issued in March 2022 and the second report dated October 2023.

7    Mr Guo was a director of Blockchain Global for two periods of time, specifically, from 17 November 2017 to 3 June 2019, and from 4 September 2014 to 7 October 2016.

8    Mr Guo is a citizen of China. The affidavit material reveals that he holds an Australian Resident Return Visa. Material that ASIC has obtained, consisting of an affidavit affirmed by Mr Guo in a Victorian Supreme Court proceeding, reveals that Mr Guo shares parenting responsibilities with his ex-wife. Mr Guo’s ex-wife and their child reside in Melbourne. Further, Mr Guo has a 61-year-old father living in China.

9    ASIC has examined Mr Guo’s travel records. Those records reveal that he returned from a visit to China recently, on 14 February 2024. It appears that Mr Guo travelled to China with his mother and his child. The intended address stated in the incoming passenger cards of Mr Guo and his mother is in Elizabeth Street, Melbourne. This appears to be an apartment in the CBD owned by Mr Guo together with his ex-wife. The intended address stated for Mr Guo’s child is an address in Balwyn North, which appears to be the residence of Mr Guo’s ex-wife.

10    Accordingly, it is clear that Mr Guo has significant ties to Australia, notwithstanding that he is a citizen of China, has a father who appears to still live in China and, according to other information available to ASIC, has bank accounts in China and other ties with China.

11    ASIC commenced its investigation pursuant to s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) on 16 January 2024. It is not apparent why the investigation was commenced when it was, given when Blockchain Global failed. Nonetheless, the investigation is on foot, albeit in its early days.

12    Ms Das deposes to the fact that other persons of interests, being other directors of Blockchain Global, left Australia soon after its collapse, making Mr Guo the only person closely involved with the affairs of Blockchain Global who remains in Australia. ASIC anticipates that interviewing or examining Mr Guo will be critical to ASIC pursuing the investigation, which it anticipates may culminate in the referral of a brief of evidence to the Commonwealth Director of Public Prosecutions. Ms Das deposes in her affidavit to the particular conduct of Mr Guo which ASIC considers may have contravened s 184 of the Corporations Act, as well as ss 81 and 82 of the Crimes Act 1958 (Vic).

13    In particular, ASIC has stated that it appears that, on 6 March 2018, Mr Guo used the ACX Exchange to transfer investor funds by causing over $333,000 to be withdrawn from an account associated with Blockchain Global to purchase shares in First Growth Fund Limited, for the benefit of ACL Investment Australia Pty Limited, which is a trustee of the family trust associated with Mr Guo’s family. ASIC also claimed that Mr Guo caused the transfer of $1.4 million from an account associated with Blockchain Global to purchase further shares in First Growth Fund Limited for the benefit of Blockchain Global, but without recording that transaction in the accounts of Blockchain Global. ASIC has also noted that, during his directorship, Mr Guo transferred $2.6 million out of a bank account holding investor funds, some of which was applied to his personal home loan account and his personal bank account. ASIC has also referred to Mr Guo retaining 23.11 bitcoins, said to be worth approximately $1.8 million, which were the property of Blockchain Global and having transferred them into a cryptocurrency wallet controlled by Mr Guo on 8 December 2019.

14    As is clear, the allegations against Mr Guo are very serious.

Legislative context

15    The application was brought pursuant to section 1323 of the Corporations Act, particularly subsections (1)(j) and (k) and (3).

16    Section 1323(1) relevantly provides that:

(1)    Where:

(a)    an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act;

…

    and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person) to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the relevant person), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders:

    …

(j)    if the relevant person is a natural person—an order requiring that person to deliver up to the Court his or her passport and such other documents as the Court thinks fit;

(k)    if the relevant person is a natural person—an order prohibiting that person from leaving this jurisdiction, or Australia, without the consent of the Court.

17    Section 1323(3) provides that:

Where an application is made to the Court for an order under subsection (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.

Consideration

18    For the reasons that follow, the orders sought by ASIC should be made.

19    ASIC acknowledges that it has no particular information that suggests Mr Guo intends to leave Australia in the short term, but nonetheless is concerned that there is a flight risk given the nature of the allegations that it is investigating and the potential for criminal prosecution of Mr Guo. Ms Das has deposed to the work that ASIC anticipates its investigation will involve, and the time that ASIC anticipates the investigation will take from completion through to the point of being able to deliver a brief to the DPP. That entire process is anticipated to take approximately 12 months.

20    In its submissions, ASIC set out the relevant principles that inform the exercise of the discretion under s 1323. As the authorities to which ASIC has referred make clear, it is a serious matter to restrain a person from travelling internationally: Australian Securities and Investments Commission; in the matter of Richstar Enterprises Pty Ltd v Carey (No 19) (2008) 65 ACSR 421; [2008] FCA 38 at [32] (per French J, as his Honour then was). In determining whether or not to make orders under s 1323, the Court does not need to be in a position to identify with precision any particular liability owed by the person the subject of the proposed order, and there is no requirement that ASIC demonstrate a prima facie case: Australian Securities and Investments Commission v Carey (No 3) (2006) 57 ACSR 307; [2006] FCA 433 (Carey (No 3)) at [26] (French J).

21    Rather, and as the terms of the statute make clear, the critical consideration is whether it is necessary or desirable for the purpose of protecting the interests of the aggrieved persons, being those to whom Mr Guo may be liable, to make the orders sought. That is essentially a question of risk assessment and management, and requires the Court to perform a balancing exercise, weighing the benefit and detriment to the defendant against the interests of the aggrieved persons: Carey (No 3) at [26]; Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318 at [32] (Gordon J).

22    In the circumstances, the private right to travel may be outweighed by the public interest in ASIC being able to pursue its investigations, and for the purpose of protecting the interests of the aggrieved persons: see Australian Securities and Investments Commissioner v Johnston [2009] FCA 1276 at [8] (Siopis J).

23    The freedom of movement of Mr Guo is an important right to be taken into account, particularly in circumstances where he has an elderly father resident in China. I also take into account that the liquidator has issued reports and there has been a liquidator’s examination of Mr Guo, meaning that aggrieved persons have had access to some material with which to commence proceedings against Mr Guo already should they wish to do so. Further, one group of investors has already brought a proceeding against Mr Guo and others, including Blockchain Global, which has been stayed pursuant to s 440D of the Corporations Act. There is no evidence as to whether or not that group of investors has sought to commence any separate proceedings against Mr Guo.

24    Against those matters, ASIC submitted, and I accept, that the continued presence of Mr Guo in Australia is necessary or desirable for the following reasons. First, the ASIC investigation is in its early stages and ASIC has not yet had the opportunity to speak with Mr Guo. Secondly, Mr Guo is a “central player” in the matters set out in the liquidators’ reports. It will be necessary for ASIC to interview or examine Mr Guo, particularly as he is the only person of interest who remains in Australia and his examination may improve the prospects of the aggrieved persons recovering monies.

25    As I have already noted, ASIC has set out in its material that it is conducting an investigation under the ASIC Act. Accordingly, the threshold requirement set out in s 1323(1)(a) is satisfied. ASIC has also identified the aggrieved persons to whom Mr Guo may be liable and the character of the potential contraventions and bases on which such liability may be established.

26    Having regard to these matters, I am satisfied that it is appropriate to make interim orders in substantially the form that have been sought by ASIC.

27    I have, however, inserted a backstop date of six months for the restraining orders. That backstop has been inserted, notwithstanding that the orders are only sought on an interim basis, so that orders are not made with indefinite application, as would have occurred on the basis of the proposed orders as originally framed. It will, of course, be a matter for the judge hearing the contested application upon its return to fix the appropriate period (if the travel restraints remain in place).

Associate:

Dated:    23 February 2024