Crime does not pay; if anything, it makes you. And this was made evident with the recent Clee Capital vs Malaysian BNPL firm IOUPay (ASX: IOU) court drama. Playing out in a Johnny Depp and Amber Heard fashion, after IOUPay’s former CFO Kenneth Kuan Choon Hsuing—accused of misappropriating company funds—helped shareholder Clee Capital sue the Company, the case has come back to bite him.

The judge dismissed Clee Capital’s case, claiming it had little evidence to back it up. Now, they have to pay IOUPay for the legal costs incurred, and it’s going to be a lot. 

The then CFO made it look like approximately $4 million was held in law firm Thomas Philip’s trust account. But it now appears that those representations were wrong, and that the surplus has been disbursed to other parties (as IOUPay had mentioned before).

According to Clee, Hsuing wasn’t involved in any fraud and has “expressly disclaimed any allegation of dishonesty” by anyone in the management of the respondent company, the report noted.

Clee had sought multiple compensations from IOUPay. These include that the Company be restrained from raising any capital, entering into any loan agreements or otherwise incurring any debts. Secondly, it demands that IOUPay appoint an investigator (said to be independent, but also to be nominated by, and acting on behalf of, Clee) to report to the court on the financial affairs and the facts and circumstances giving rise to Clee’s alleged causes of action. And finally, it requires the Company to hand over its hard drives and data servers containing the Company’s financial records to Clee’s solicitors. 

Now, the case looks like a botched attempt at a cover-up.

Expedited to the Federal Court of Australia, Honour Justice Jackman said in delivering his verdict, “In my opinion, the respondent (IOU) has provided sufficient answers to the various complaints of the applicant (Clee) to satisfy me that, on the current evidence, there is no realistic prospect of a receiver being appointed. 

“The directors of the respondent appear to be taking appropriate steps to investigate transactions and to safeguard the company’s property. The apparent perpetrator of the fraud has been removed from the company.” 

For IOUPay, however, the woes haven’t ended. Despite the ruling made in the Company’s favour, these proceedings by Clee have had a negative impact. The majority of its time has been devoted to dealing with these legal proceedings over the past two weeks. Further, due to the uncertainty created by the proceedings, the Company has been unable to progress negotiations with potential financiers in a timely manner (an important step, seeing as the Company has been incurring losses). 

This has seriously hampered the Board’s efforts to ensure the ongoing solvency of the Company, which is necessary in order to get the Company back trading on ASX, having been in suspension since the Clee Capital proceedings first commenced in March 2023. 

If that wasn’t enough, it has also incurred legal costs making its financial position worse, but Clee has been ordered to cover these costs, but is unlikely to make immediate payment. 

The current CFO Isaac Chong Kwong Yang commented, “It is prudent and more cost and time efficient for the respondent to raise money to cover both the April 2023 expenses set out above and the second tranche payment of AUD$3.2 million in the same transaction.”

Currently, IOUPay is still struggling to raise the required $5 million. But thanks to the legal proceedings ending, IOUPay will return its focus to ensuring the financial sustainability of the Company, recovering the misappropriated funds in Malaysia, and continuing the investigation into the apparent fraud.  

The Board will also progress with a revised business strategy.