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District Court 12 July 2024

R v Bigatton (No 5)

[2024] NSWDC 285

Fraud & dishonesty
SENTENCING COMMONWEALTH OFFENCES CORPORATIONS ACT OFFENCES COLLAPSE OF BITCONNECT LENDING PLATFORM FINANCIAL SERVICES ADVICE GENERAL DETERRENCE

Citation: R v Bigatton (No 5) [2024] NSWDC 285
Court: District Court of New South Wales
Date: 12 July 2024
Judge: Newlinds SC DCJ

Background

The offender was appointed National Promoter for BitConnect in Australia in August 2017. BitConnect operated an online cryptocurrency lending platform that invited investors to loan cryptocurrency tokens in exchange for promised high interest rates. The offender promoted the platform through seminars held around Australia, social media posts, and face-to-face investor meetings, earning referral commissions in the process.

Between August 2017 and January 2018, the offender provided financial product advice in relation to the BitConnect Lending Platform without holding an Australian Financial Services Licence (AFSL) or any authorisation to provide financial services. He had prior training and experience in the financial services industry, giving him awareness that unlicensed financial services advice was prohibited. Before providing advice, the offender used disclaimers asserting that what he was saying did not constitute financial advice.

The proceedings against the offender commenced in November 2022 and generated a lengthy interlocutory history, including multiple earlier judgments and a Court of Criminal Appeal decision. An eight-week trial listed for May 2024 was vacated when the offender entered a late guilty plea to a single charge under ss 911B(1) and 1311(1) of the Corporations Act 2001 (Cth), which the Crown accepted in full satisfaction of the two remaining charges.

  • Whether the offender's use of disclaimers negated the characterisation of his conduct as providing financial product advice
  • The objective seriousness of the offending and the weight to be given to general deterrence for this category of regulatory crime
  • Whether the offender's subjective circumstances, including personal hardship and prior good character, warranted a non-custodial outcome
  • The appropriate sentencing disposition under s 20(1)(a) of the Crimes Act 1914 (Cth)

Decision

On disclaimers and substance over form: The District Court rejected the proposition that labelling advice as "not financial advice" removes it from the regulatory scheme. His Honour stated clearly that the law treats the question of whether a person is providing financial product advice as a matter of substance over form. Providing financial product advice under a heading that it is not financial advice will almost always still constitute the provision of financial product advice.

On general deterrence: His Honour emphasised that the regulatory framework in Chapter 7 of the Corporations Act exists to protect the community, particularly less financially sophisticated members who often hold significant wealth in self-managed superannuation funds. White-collar crime is not treated more leniently than other crime by the courts, and non-compliance with financial services licensing obligations carries the expectation of serious consequences. The need for general deterrence in this type of offending was described as significant.

On subjective circumstances: Notwithstanding the deterrence considerations, the court found the offender's subjective case to be exceptionally strong. His prior good character, significant personal tragedy (including the death of his wife from cancer and subsequent suicide), the freezing of his assets for approximately six years, and his role as a sole parent to two young daughters all carried considerable weight. The offender demonstrated genuine remorse and had been through a prolonged ordeal, not entirely of his own making. His Honour was satisfied that rehabilitation had substantially occurred and that reoffending was not a real prospect.

On sentencing outcome: Weighing the objective seriousness of the conduct against the strength of the subjective case, the court determined that a custodial sentence was not warranted. His Honour noted that the six years the offender had spent embroiled in proceedings with prosecutors and ASIC was itself a significant consequence, relevant to denunciation and punishment. The proposed outcome was consistent with comparable decisions across Australian jurisdictions.

Orders Made

  • The offender was convicted.
  • The offender was conditionally released pursuant to s 20(1)(a) of the Crimes Act 1914 (Cth) upon entering into a recognisance in the sum of $100 (without security).
  • The condition of the recognisance is that the offender be of good behaviour for three years, commencing 12 July 2024 and expiring 11 July 2027.

Key Takeaways

  • The District Court confirmed that disclaimers stating that communications do not constitute financial advice do not determine the legal characterisation of those communications. Whether financial product advice has been provided is assessed by reference to substance, not form.
  • Under the Chapter 7 regulatory framework, persons involved in promoting financial products for profit bear a personal obligation to ascertain and comply with licensing requirements. Prior industry experience is treated as aggravating in that context.
  • White-collar regulatory offending under the Corporations Act attracts the same approach to sentencing as other criminal conduct, with the court noting that general deterrence carries particular weight where offending is difficult to detect and prosecute.
  • A conviction without further sentence under s 20(1)(a) of the Crimes Act 1914 (Cth) remains available even for regulatory offences carrying imprisonment, where an exceptionally powerful subjective case displaces the need for custody.
  • Prolonged regulatory and criminal proceedings, the freezing of assets over many years, and sustained personal hardship were treated as relevant to the sentencing calculus on punishment and denunciation, even where those consequences arose in part from civil proceedings rather than the criminal prosecution itself.

Legislation and Cases Referenced

Legislation:
- Corporations Act 2001 (Cth), ss 760A, 911B(1)(a)-(e), 1311(1)
- Crimes Act 1914 (Cth), Part 1B, ss 16A, 16A(1), 16A(2)(a)-(n), 20(1)(a)
- Proceeds of Crime Act 2002 (Cth)

Cases:
- R v Bigatton (No 2) [2023] NSWDC 290
- R v Bigatton (No 3) [2023] NSWDC 291
- R v Bigatton (No 4) [2023] NSWDC 458
- Decision restricted [2024] NSWCCA 23
- Commissioner of the Australian Federal Police v Bigatton [2020] NSWSC 245
- Baden v The Queen [2020] NSWCCA 23
- Bae v R [2020] NSWCCA 35
- Cameron v The Queen (2002) 209 CLR 339
- DPP v Verdins (2007) 16 VR 268
- Huang aka Liu v R [2018] NSWCCA 70
- R v Adler [2005] NSWSC 274
- R v Cox [2013] QCA 10
- R v Katsoulis [2008] VSCA 278
- R v Todd [1982] 2 NSWLR 517
- Xiao v R [2018] NSWCCA 4