Metigy founder David Fairfull charged with fraud over the startup’s collapse

David Fairfull, the bankrupt founder and former CEO of marketing startup Metigy, appeared in Sydney’s Downing Centre Local Court on Friday to face six charges following an ASIC investigation into the failure of the company.

Fairfull was charged with five counts making false and misleading statements contrary to the Corporations Act, plus one count of dishonestly as a company director.

ASIC’s investigation alleges that between 2018 and 2021, Fairfull provided false information about the company’s revenue and income to potential investors and used his position as a director to obtain a loan for his own personal benefit, borrowing more than $7 million from the business to buy two houses.

Metigy was founded by Fairfull, the former We Are Social managing partner in 2015, to give small businesses access to data and strategic insights normally used by marketers at major corporations.

The digital marketing startup collapsed into admistration in July 2022, just 20 months after the business raised $20 million in a Series B round led by Cygnet Capital. Metigy raised a total of $27.1 million. It was supposedly valued at $1 billion at one stage, but ultimately it emerged that the entire business was a house of cards.

The martech startup’s backers included Regal Funds Management, OC Funds, Five V Capital, Alex Waislitz’s Thorney Investments and CP Ventures. The company supposedly used artificial intelligence (AI) to help small business market, but subsequent court action revealed there was no AI in place. The platform supposedly offered real-time data from social and digital advertising channels into easy-to-understand insights and recommendations.

During a Federal Court investigation last year instigated by administrators Cathro & Partners, Regal Funds portfolio manager Ben McCallum filed an affidavit alleging that when he went to see Fairfull at his Mosman home, the Metigy boss told the investor that he’d “doctored the statements” on the company’s revenue, which claimed to be in the millions, and “the bulk of the figures are fabricated”.

The actual revenue was just above $43,000 for the year.

Questioned by Cathro’s legal team during the case, Fairfull admitted to providing false bank statements and knowing it was dishonest, but said he acted alone, and used Adobe software to falsify bank statements. His admissions cannot be used in the ASIC legal proceedings.

The Federal Court found that financial documents sent to investors by the Metigy CEO were “a charade” when the legal battle between the company and investors was settled last year.

Fairfull was declared bankrupt in November 2022.

But while running Metigy, he had borrowed more than $7.7 million from the company as a personal loan to buy two properties – a $10.5 million six bedroom house overlooking Sydney Harbour in Mosman, and a $7.7 million rural retreat in Kangaroo Valley. He repaid $3.7 million of the loan before the startup collapsed.

Those properties were sold by Metigy’s liquidators in December 2022, making a $1.5 million profit on the Mosman house and a $1.45 million loss on the Kangaroo Valley one.

Metigy had owed millions to the ATO, as well as money for superannuation and payroll tax to the NSW government. Staff had faced issues with getting paid on time. The Federal Court heard that the matter came to a head in mid-2022 when Metigy’s chief financial officer looked to seize control of the business and raise funds as the money ran out, revealing the startup’s true financial state.

Now the Commonwealth Director of Public Prosecutions will run the fraud case against Fairfull, following a referral from ASIC.

ASIC deputy chair Sarah Court said directors’ duties are “an enduring priority” for the regulator.

“Company directors play an integral role in overseeing governance in addition to both performance and compliance and as such have a responsibility to act with integrity and honesty,” she said.

The matter returns to the Downing Centre Local Court on December 10.