'Lies': Australian with A-list connections accused of fraud

Entertainment entrepreneur Ron Creevey has had a lot on his plate lately.

First there is the debut of Channel Seven's exclusive documentary on the late Michael Hutchence that he has claimed he helped germinate, though he recently has confirmed he is no longer involved in the project.

There's the 12-part series on Sydney's Sons of Anarchy, with colourful Sydney nightclub owner John Ibrahim as a creative adviser, which has been shelved.

Then there's the relaunch of his music venue the X Studio, which copped a double bruising from Sydney's lockout laws and a legal stoush with current Bachelorette star Sophie Monk over an allegedly unpaid contract. That matter was settled earlier this year.

Oh, and then there's that securities fraud matter he is facing in New York.

To Creevey, who spoke to Fairfax Media by email, the allegations ware "#fakenews", a "smear campaign" and "defamatory".

The lawyer for the US investors who have made the allegations, Ken Sussmane, says Creevey owes his clients "hundreds of thousands of dollars".

The legal affair, which is laid bare in court documents filed in New York and available online, has again shone the light on Australia's nascent tech scene, which has produce a few fabled "unicorns" but also a growing list of "tech wrecks".

The company at the centre of the New York civil action is Yuuzoo and it too looks set to join the tech wreck list.

It was founded by Creevey and former Nokia Asia Pacific chief executive Thomas Zilliacus in 2008 and listed in Singapore in 2014. The company bills itself as an e-commerce platform specialised for social networks.

Star cast

Leading the case against Creevey is New York-based Jim Heckler, a man-about-town with celebrity friends and a list of deeply trendy Manhattan venues to his name.

Along with his Los Angeles-based actor-director brother Andrew, Heckler alleges Creevey and his long-time business partner Mark Cramer-Roberts were involved in a fraud relating to Yuuzoo ahead of its float.

Also in the Hecklers' sights is Zilliacus, US bank Wells Fargo and former Wells Fargo adviser John Hoekman. Hoekman is accused of promoting Yuuzoo's shares to New York's socialite set.

Creevey's private company, Yuuu Pty Ltd, and Moment Media Pty Ltd are also listed as defendants.

The allegation is that Creevey and his associates fraudulently made Yuuzoo look like a successful entity valued at $US383 million ($490 million).

The US investors say it was all a mirage. They allege they were presented with accounts that made Yuuzoo look much healthier than it was.

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Today Yuuzoo's market capitalisation is a mere $S50 million ($A47 million).

The investors are seeking damages in excess of $US500,000 and punitive damages in the quantum to "deter future misconduct". Punitive damages in the US can stretch into the millions.

Like Creevey, London-based Cramer-Roberts describes the allegations as "totally incorrect".

But the Hecklers tell a different tale of the duo who once counted the wealthy Packer family as backers of one of their earlier projects.

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Like many lawsuits involving start-ups, the allegations are complex.

They include that related-party companies linked to Creevey and Cramer-Roberts made up about a third of Yuuzoo's total sales in 2011 and 2012. It is alleged that this relationship was not disclosed to would-be investors by Hoekman.

It is also claimed that a substantial portion of sales booked by Yuuzoo from its Australian franchise, YZ Australia, were in fact licence fees.

Those fees weren't paid in cash from sales but, it is alleged, by delivery of shares of YZ Australia to Yuuzoo.

They also allege Yuuzoo used seven dormant companies in the UK to pump up the sales of Yuuzoo by 400 per cent to make it look more successful than it was.

Both Creevey and Cramer-Roberts strenuously deny the allegations.

Creevey claims he has not been involved with Yuuzoo since 2012. (He was though, a significant shareholder in Yuuzoo ahead of its 2014 listing on the Singapore exchange through his private vehicle Yuuu Pty Ltd, according to offer documents.)

And Cramer-Roberts says that he was never a representative of Yuuzoo, had no insight into the company's accounting, and there were never any licences fees paid in stock to YuuZoo.

"It was cash payments for licences only," he says.

"My only affiliation was that of a licence holder. I paid vast amounts of money to hold licences," he says, adding that he had lost a lot of money on his investment.

Disappointing results

There is no denying Yuuzoo has been a disappointment for investors.

Simon Bosch

Illustration: Simon Bosch

According to offer documents for Yuuzoo's reverse takeover in 2014 of W Corporation, the offer price on consolidated company shares was $S1. As of this week, Yuuzoo's shares were trading at six Singapore cents.

The company now joins Guvera on the list of Australian tech companies linked to the entertainment industry that have left investors poorer and raised serious questions about the financial bona fides of the company.

But tech stocks can run into trouble without any suspicion of impropriety.

Recently, the Australian market turned on tech darlings construction software firm Aconex and telecommunications group Vocus after the companies' respective set of results.

And last week, BusinessDay detailed the trials and tribulations of wearable sports tech company Catapult.

But unlike the rather ho-hum backstories of some tech outfits, how Yuuzoo came to list and its now parlous financial and governance situation is quite the tale that stretches back more than a decade.

Creevey first shot to attention in Australia back in 2005 when the catering business he ran with Cramer-Roberts spectacularly imploded.

Ahead of its collapse, The Cabinet had counted Luna Park and a host of other high profile companies as clients.

Mark Cramer-Roberts (right) and Ron Creevey during their time running The Cabinet.

Mark Cramer-Roberts (right) and Ron Creevey during their time running The Cabinet. Photo: Andrew Quilty

Its investors included hotelier Justin Hemmes, stockbroker Peter Burrows and the then Packer family-controlled financial services company Challenger.

But in 2005 The Cabinet collapsed under $16 million of debts. Creevey and Cramer-Roberts petitioned for bankruptcy later that year.

After a few years licking their wounds Creevey and Cramer-Roberts were back in business, but this time the duo had gone back to their technology roots, where they had, through internet provider MagnaData, made their first millions.

Creevey would end up putting together Yuuzoo with Zilliacus. Cramer-Roberts was also involved in the formation of the company's UK business.

The new tech company was pitched as a modern way for corporates, celebrities, entertainers and sporting clubs to harness social media use by consumers, supporters or fans.

To do this, Yuuzoo develops and sells niche, tailor-made social media sites for mobile phones. Its market is big festivals, sporting events and companies. Regular users can also sign up and explore its bespoke social networks.

https://www.cnbc.com/video/2016/05/12/what-exactly-is-yuuzoo-about.html

According to the offer documents pertaining to the back-door listing of Yuuzoo in 2014, one of the company's biggest clients is Moment Media Pty Ltd.

Moment was contracted to Yuuzoo for four of its largest client-branded networks, including "Kyle Sandilands Social Media", a social media network designed for fans of the popular radio personality.

Moment Media counts Creevey as its sole director and has previously been mooted for its own multimillion-dollar float. Yuuzoo's relationship with Moment Media is one of the related-party deals the Hecklers say they were not informed of by Hoekman before investing.

Cramer-Roberts and former Telstra chairman Bob Mansfield are former shareholders.

The media campaign to promote Yuuzoo started to swing into force in 2013. It was around then that Yuuzoo began courting investors in the US in advance of the Singapore float.

The Hecklers and Jim Heckler's company Hecklerco were two of the early pre-float investors in Yuuzoo.

It's a decision they now regret.

According to court documents, the Hecklers and Hecklerco acquired 160,000 shares for a total of $US200,000.

They also made a $US245,000 loan to Creevey's private Yuuu Pty Ltd between June and November 2013.

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Hecklerco acquired a further 50,000 shares as part of that loan agreement with Creevey, it is alleged.

A further 90,000 shares were pledged when Creevey allegedly asked for an extension of the loan.

These purchases were made based on "fraudulent" misrepresentations made by Hoekman, Cramer-Roberts and Creevey as to the financial strength of the company it is alleged.

In a laundry list of accusations, the Hecklers say they were also never told by Hoekman of Creevey's and Cramer-Roberts' failed business, their bankruptcies, the related-party dealings between Yuuzoo and entities associated with the Australian businessmen, that Yuuzoo had tried to list in America before its Singapore listing but was rejected, and that "YZ (International Inc) was a sham organisation with no business and no offices".

They were also allegedly told that the shares pledged by Yuuu would be free trading within seven days of the float, despite knowing the SGX had a six-month moratorium on the trading of these specific shares.

Movie makers

In an unusual turn of events, the claim alleges the money raised from the Hecklers and Hecklerco for Yuuzoo shares was used to back an indie film, The Makings of You.

The film starred Sheryl Lee, who shot to fame as Laura Palmer in the original Twin Peaks television series, and was produced by The Masses, a company linked to Creevey's Moment Media.

It toured film festivals in 2014 and 2015.

The credits show the executive producers of the film were Hoekman and Creevey.

Creevey did not respond to questions about the financing of The Makings of You.

He says he does not owe Jim Heckler any money.

"This is #fakenews. Fabricated lies and false allegations by a group of Yankee carpetbaggers," Creevey says.

"In fact, Hecklerco owes me money, in relation to which I am in the process of instigating legal action against him and his company," he adds.

Creevey says he would continue to push forward to develop platforms and companies that serve the entertainment industry.

"Finally, let me be clear that I will stop at nothing to protect the interests of my business, its investors and employees," Creevey says.

"To that end I reserve my rights completely to the extent there is any defamatory or misrepresentative publication made about me, whether arising from Mr Heckler's campaign of smear and fabrication, or otherwise."

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In London, Cramer-Roberts via email describes the allegations as inaccurate and disappointing.

"This claim upon me is a complete misrepresentation and I reserve all the rights against the plaintiff for such an outrageous claim," he says.

He adds that he was licence holder of Yuuzoo's UK franchise and that company had no direct relationship with Yuuzoo other than the issue of the licence.

He says Yuuzoo UK "has been shut down due to the licence being taken back by Yuuzoo Corporation", adding the clients were transferred to Yuuzoo.

"To the best of my knowledge the [Heckler] loan was settled by Mr Creevey in full and final satisfaction at the time," he says.

Both Creevey and Cramer-Roberts are yet to file any defence with the court.

Court records show Cramer-Roberts has not formally been served (and as such is under no obligation to file a defence), while Creevey's lawyer, Brenton Yates, has claimed in a letter to the court that Creevey was never served despite an affidavit of service indicating otherwise.

But while the music continues for Creevey through his other venture, Helipad Media, it has well and truly stopped for the former Wells Fargo adviser who sold investors the shares, Hoekman.

Well Fargo declined to comment.

Well Fargo declined to comment. Photo: BEN MARGOT

A spokeswoman for Wells Fargo told Fairfax Media that Hoekman left Wells Fargo in August 2015 "during a review by the firm". His departure followed the Hecklers' notifying Wells Fargo of their claim.

"Wells Fargo Advisors maintains rigorous policies and procedures governing conflicts of interest, and we do not comment on pending litigation or personnel matters," the spokeswoman said.

Hoekman was permanently banned from associating with any member of the Financial Industry Regulatory Authority after he failed to provide documents and information requested during the course of an examination into allegations he had engaged in certain outside business activities without the knowledge or consent of Wells Fargo.

He accepted the ban with no admission or denial of the allegations made against him by his former clients.

It is not clear whether another loan sought by Creevey to New York PR doyenne Ann Magnin was related to the purchase of shares in Yuuzoo. Magnin won a $US665,000 judgment against Creevey earlier this year in the Supreme Court of NSW. She was also awarded costs on an indemnity basis. Magnin did not respond to inquiries.

Magnin was also listed as a creditor of Hoekman's in his self-instigated bankruptcy proceedings alongside the Hecklers, Hecklerco and Australian-based investors. Those proceedings have been stayed.

Ron Creevey

Ron Creevey Photo: James Brickwood

Creevey and Cramer-Roberts' lawyer, Brenton Yates, claims he was told by a US attorney "with direct involvement in the matter" that Hecklerco agreed to abandon its claims against Creevey, Moment Media and Cramer-Roberts as part of the Yuuzoo settlement.

However, the Hecklers' lawyer, Ken Sussmane, says the matter against Yates' clients continues and they are not party to the settlement.

"Any statement that my clients owe money to Mr Creevey is false and defamatory," Sussmane says. "If money was owed to Mr Creevey he would have showed up in court to defend himself and made his claims in the active court case."

As for the allegations against the company Yuuzoo and its chairman Zilliacus; they were settled in August.

Yet, despite Yuuzoo disclosing the allegations to the SGX in July after a series of reports in the Singapore business press and assuring the market they would keep it updated about the "frivolous allegations", the company appears to have made no mention of the confidential settlement.

A spokeswoman said the quantum of the settlement was not significant and was confidential.

"All complaints and allegations were withdrawn as part of the settlement. YuuZoo has in its earlier responses already denied all of the allegations, and also shown them not to be correct," the spokeswoman said.

She added that none of Yuuzoo's current clients were from entities associated with Creevey or Cramer-Roberts.

In regard to the fall in the company's share price, the spokeswoman said: "The company is trading at a P/E ratio of below two. The average P/E ratio for comparable companies is above 25. If Yuuzoo was given an average P/E ratio, the share price would be well above the listing price."

Yuuzoo has been a point of concern for the SGX since before its float, according to emails from Zilliacus to shareholders filed as exhibits in the New York court.

It remains so now.

The company has recently appointed new board members, a new chief financial officer and is on the hunt for a new chief executive after Zilliacus stepped back into a non-executive role to strengthen the group's governance. It has told the market its auditors have signed off on its accounts and in 2016 there were no transactions with interested parties.

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It also produced a profit for the second quarter of 2017 of $S8.2 million. However, in response to a recent inquiry by the SGX, Yuuzoo told the market that some of its contracts were with entities associated with Mobile FutureWorks Inc, a company that is a controlling shareholder of Yuuzoo and in which Thomas Zilliacus has a controlling interest

SGX head of listing compliance June Sim said the exchange had been monitoring Yuuzoo's disclosures.

"Yuuzoo has announced its plan to engage an independent reviewer," Sim said.

"SGX is in close contact with the company on the reviewer's appointment including terms of reference of the appointment."

A spokesman for Singapore's corporate regulator, the Monetary Authority of Singapore, said "as a matter of policy, MAS does not comment on our specific dealings with listed issuers".

"Where breaches of the Securities and Futures Act are found to have been committed, we will not hesitate to take appropriate action," the spokesman said.

In a recent YouTube clip loaded up to the Yuuzoo website, Zilliacus said part of the company's strategy was delivering a good bottom line and good profit from which the company can pay dividends.

"However, it is very important to understand in the case of Yuuzoo that this is a secondary part of our strategy. Our primary part is to build, hold and ultimately sell companies that use our unique and, in many cases, patented technology."

To some people that might sound like Yuuzoo has a circular business model. But its supporters, including Zilliacus who also run the South Korean beauty pageant Miss Supertalent of the World, say people simply don't understand the business model.

The case in New York continues.

Know More? Contact sarah.danckert@fairfaxmedia.com.au

The story 'Lies': Australian with A-list connections accused of fraud first appeared on The Sydney Morning Herald.

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