Fraud, losses, oustings and backtracking on deals—you’d think digital payments firm IOUPay (ASX: IOU)’s coffin couldn’t take any more nails. Untrue. The Company is now facing a new woe—and a big one at that: legal action via a disgruntled former CFO.
IOUPay is being sued by one of its shareholders, Clee Capital, which holds 5.08% of the Company and is representing the group of shareholders seeking to remove the Board and install its own nominated directors.
Clee Capital wants IOUPay to be restrained from making any payments or incurring any liabilities other than in the ordinary business. The Company must hand over all of its hard drives and data servers to Clee Capital’s lawyers. It also involves the appointment of an independent investigator into the financial affairs of the Company, and a receiver and manager be appointed to all of the Company’s property.
If that wasn’t enough, Clee Capital is being assisted by witness Kenneth Kuan Choon Hsuing, the Company’s former CFO who was dismissed on March 11, 2023 and is accused of fraud. Kuan is accused of misusing Company funds worth about $4 million and issuing unauthorised loans. He also stands to benefit from the hard drives and servers being confiscated.
Kuan is currently being investigated by the Malaysian police owing to the misappropriation of the Company’s funds. Accordingly, there is already an independent police investigation on foot into the recent financial affairs of the Company’s Malaysian subsidiary.
If Clee Capital’s orders are granted, it would prohibit the Company from obtaining a loan or any other capital injection. Even though IOUPay feels that there is enough cash available to support operations, in light of ongoing issues, it would be prudent for IOUPay to investigate the options available for either a loan or capital raising to assist with cash flow in the short term.
However, the orders sought by Clee Capital and Kuan would restrain the Board from pursuing these options. It would also hinder the Company’s ability to assist the Malaysian police in their investigation into the suspected fraud, becoming a win-win for Kuan.
IOUPay will be resisting the application but will also keep providing regular updates on the investigations into the suspected fraud, and the steps being taken to recover misappropriated funds, optimise the cost base of the business in Malaysia, and obtain limited funding to assist with cash flow while these steps are taken.
While IOUPay has a field day shielding itself, investors are irked with the Company’s direction. Besides dealing with the internal drama, IOUPay is also facing a decline in its main business, i.e. buy-now-pay-later (BNPL). It’s restated financials will indicate how deep a trouble IOUPay is in now, and the odds of its board being changed.
Alinda is a Business Reporter for The Sentiment
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