It wasn’t only the 1,500 investors who lost $35,881,200 in the online trading scam. It was also the Companies Register that was scammed by what ASIC calls “hydra-like” scammers who used ‘front’ companies with no directors, non-consenting directors or non-resident directors, and without meaningful assets.
In his reasons for judgment in Australian Securities and Investments Commission v 24-U Pty Ltd [2025] FCA 321 (Federal Court of Australia) (4 April 2025), Justice Stewart describes how transnational organised crime groups operating out of scam centres in Southeast Asia set up shell companies and conducted a “pig butchering” also known as “Sha Zhu Pan” online trading scam.
According to the Australian Federal Police (Media Release 21 January 2024),
“Pig butchering, also known as romance baiting and Sha Zhu Pan, is a scam in which offenders often devote long periods of time to gain the trust of victims before encouraging them to invest in the share market, cryptocurrency or foreign currency exchanges.
Victims think they are trading on legitimate platforms but the money is actually siphoned into an account owned by offenders who created fake platforms that look identical to well-known sites.”
Justice Stewart added:
“Ultimately, when an attempt is made to withdraw funds, the victims are unable to do so and never recover their invested funds or any profits from the purported trading. Thus, the victims are fattened like pigs for slaughter.”
The Court proceedings and orders
In October 2023, ASIC (Australian Securities and Investments Commission) started to investigate 95 companies suspected of being associated with the “pig butchering” scam.
One year later, on 31 October 2024, ASIC had court appointed provisional liquidators appointed to the companies.
The provisional liquidators acted quickly. In December 2024, they delivered their preliminary report that only 3 of the 95 companies had assets. The assets totalled only $33,018. This was all that could be found of the total of $35,881,288 claimed by investors located in the United Arab Emirates, the United States of America, Australia, Cameroon, Canada, Ghana, India, Ireland, Morocco, Nepal, the Philippines, Qatar and France.
On 21 March 2025, Justice Stewart made these orders:
- That the companies be wound up pursuant to s 461(1)(k) of the Corporations Act
- That the provisional liquidators be appointed as liquidators of the companies and 93 of the companies be immediately deregistered, and 2 be wound up in the normal course because they had meaningful assets.
- That suppression orders be made that all personal details or personal identifiers of all individuals referred to or identified in the proceeding be prohibited from disclosure until their death, other than already publicly disclosed in the documents.
- That non-consenting directors can apply to remove documents recording their appointment and/or cessation from the Companies Register.
- The provisional liquidators be entitled to remuneration of $591,833 and disbursements of $139,175.18, each exclusive of GST.
The legal basis ASIC used to wind up the companies
The legal basis ASIC used was the just and equitable grounds - s 461(1)(k) of the Corporations Act.
The Court was satisfied that “the case for winding up each company on just and equitable grounds is overwhelming” for these reasons:
- The affairs of the companies are not properly managed and so present a risk to the public that warrants protection (the financial scam reasons).
Since July 2012, had received 48 Records of Misconduct concerning 17 of the companies, and AFCA had received similar complaints. These complaints exhibited “a common pattern of scam activity in the nature of “pig butchering”.
78 of the companies are current or former representatives of Australian Financial Services (AFS) licensees. 48 have websites or mobile applications, which ASIC suspects facilitate scams. - The companies are not operating as legitimate businesses, and many have been otherwise used to conduct financial scams against members of the public in Australia and overseas.
2 companies had no directors.
29 companies had non-consenting directors.
39 companies had a non-consenting director named as a former director.
20 companies had a director for whom there is no evidence that the director has ever been present in Australia.
8 companies had directors who had departed Australia, with no intent to live in Australia - The companies were ‘front’ companies
Most of the addresses for registered office and principal place of business were not occupied by the company.
Most of the directors were not enrolled on the Australian electoral roll, and the addresses stated were not associated with them.
92 companies did not respond to notices to produce records. The inference is that the companies failed to maintain books and records.
There was strong circumstantial evidence that the companies are being used for financial scam activity.
Not one of the companies appeared to be trading.
Why are stronger security measures needed to combat cyber fraud?
These comments were made by the Court and by ASIC.
Justice Stewart:
“I appreciate that there are potentially hundreds of defrauded investors, most of them likely being abroad, who will be deeply disappointed that there are no assets for distribution, but that is the unavoidable conclusion.”
ASIC
“ASIC takes action … by prosecuting those that help facilitate their conduct and taking down over 130 scam websites each week. Our ongoing work to uplift and improve our registry system will also help…”
“However, these scams are like hydras: you shut down one and two more take its place. That's why we're warning consumers that the threat of scams and identity fraud remains high. We remind consumers to be vigilant,” said Ms Court.
(ASIC MEDIA RELEASE (25-052MR))
The Registry/Connect program
On the ASIC webpage Stabilising and uplifting ASIC business registers ASIC states that 2025-26 Budget funding will deliver new functionality to ASIC’s RegistryConnect program to stabilise and uplift ASIC’s registers, including:
- strengthen authentication of registry users
- uplift the quality and integrity of registry data
- address cyber-security and technology risks
My suggestion is that ASIC adopt as a mandatory requirement that all new directors provide an ATO Tax Clearance. This requirement is mandatory for every sale of real estate in Australia and has been effective to strengthen the integrity of the taxation system since it was introduced in 2016. It was strengthened in 2025. See my article The net tightens on capital gains tax clearances for real estate sales.
To issue a Tax Clearance Certificate, the Australian Taxation Office must be satisfied that the applicant has lodged income tax returns recently and is satisfied as to Australian residency or foreign residency.
ASIC should make an ATO Tax Clearance a condition to be satisfied before processing forms for appointment of new directors for new companies and for existing companies.