Founder of Metigy, artificial intelligence startup that collapsed, in an $18 million property buyout spree

But in late July, Metigy, an acronym for a Greek mythical figure known for his wisdom and the word “strategy,” was put into administration. Seventy-five employees were quickly laid off, shocked and overwhelmed that jobs had gone overnight.

“It’s overwhelming when you and all your colleagues lose their jobs,” one former employee wrote on social media after being told of the collapse but before the administrator’s findings were revealed. “It’s also overwhelming when you realize you weren’t paid last month either.”

“We’re pretty shocked,” another former employee wrote on LinkedIn around the same time. “It’s not because we didn’t care enough or because we did a poor job or because market conditions weren’t in our favor, and that’s always going to be the hardest thing to deal with when you work as hard as we did.”

The administrators began combing through their books. His preliminary findings, which were presented to creditors on Friday, paint a very different picture of Metigy’s public image. The administrators Cathro & Partners wrote that the company failed due to “Low capitalization, poor strategic management of the business, inadequate cash flow or high use of cash, business losses [and] unreasonable transactions related to directors”.

The administrators’ report dated August 26 and filed with ASIC said that Metigy had not filed a tax return with the Australian Taxation Office since its inception in 2015, and the administrators believe the amount of tax due exceeds $ 3 millions. In the administrator’s opinion, Metigy’s accounts were not audited, it did not prepare formal financial statements, and it did not comply with corporate laws requiring proper accounting.

Charging

Metigy Administration, the entity that ran the group’s day-to-day business, generated “limited income since its inception, in proportion to expenses.” His sales were less than $70,000 a year for each of the last three years, less than the average Australian full-time salary.

For the fiscal year ending June 30, 2021, when online sales and marketing were booming across the economy due to pandemic lockdowns and stimuli, Metigy Management recorded just $17,299 in sales.

Metigy, the parent entity, “does not appear to have earned any income since its inception,” administrators wrote, and a third entity, Metigy Global, was dormant.

The manager and CEO of his eponymous firm, Simon Cathro, said Metigy had provided information to investors when it previously raised funds. But, he told him by email, “some of the information appears not to have reflected the true state of the financial situation at the time.”

Contributing more than $20 million in total, Metigy’s 35 backers include big names in investment circles. Five V Capital of former CVC trader Adrian Mackenzie, CP Ventures, Regal Funds Management and Melbourne billionaire investor Alex Waislitz’s Thorney Investment Group are among them.

We Are Social, a creative agency of which Fairfull was previously the managing partner, was also a shareholder.

Five V Capital, Regal and Thorney declined to comment. CP Ventures and We Are Social were contacted for comment.

Cathro said there might be enough money to cover staff payments. “He will be subject to funds that may be available from the sale of properties,” he said. “Given the type of properties, the sale of the properties should not be complex and should be quick, so we do not expect a long and expensive process from the financiers or their advisors.”

If there isn’t enough money to pay ex-workers, they may have to rely on the Fair Rights Guarantee, a government scheme that supports staff whose employers go under without enough assets to cover employee bills.

Metigy’s other assets are limited and administrators told creditors that their efforts to sell the company had been unsuccessful. Stakeholders were put off by potential brand damage and “and the difference in the financial position of the companies compared to the financial position that had been presented to the market during their various rounds of raising capital,” according to the report.

The administrators will try to recover the bonds for the leases of Metigy’s current office and another to which he will move in the start-up enclave of Surry Hills, in the interior of Sydney. They are also trying to recover up to $350,000 by selling laptops and devices, and are investigating Metigy entities in the US and Singapore, for which administrators have not been appointed.

The loan

On November 14, 2021, the report notes that Fairfull signed a loan document as both the borrower and the lender.

“The director does not dispute the existence of the loan and made representations regarding its repayment to the administrators and our legal representatives published our appointment,” the report reads. “He has reported that the purpose of the loan was to complete a personal property deal.”

The money was transferred from Metigy to a company controlled by Fairfull two days earlier, according to the report. “We have only done preliminary investigations, but we believe the money was used to purchase both properties. More analysis and tracking of the money is required,” said Cathro.

Mosman’s property purchase was settled on Nov. 16, 2021, days after Metigy’s loan was signed, according to state land searches. The same raids throw the rustic property liquidated a month later, in December.

The Cathro & Partners report suggests that a strong chance of recovering significant funds for employees and creditors is by selling the Mosman and Kangaroo Valley properties. Mortgages on both properties are in default and interest from a property lender is racking up more than $4,000 a day, according to the trustees’ report.

The report by administrators Cathro & Partners, who were appointed after Fairfull put the company into administration at the behest of investors, set out several ways money from the properties could be accessed.

One is that two Metigy entities were allegedly “insolvent as of at least November 14, 2021 when the principal took out the Metigy loan.” If that is the case, the report notes that “a liquidator is entitled to recover compensation from directors for debts they have incurred at a time when companies [were] insolvent.”

The administrators’ opinion is preliminary and is subject to change based on further investigation. Defenses to insolvent trading claims are available, although the trustees note that “we are not aware that the director has any insolvent trading defenses available to him at this time.” Litigation is expensive and time consuming. It would also depend on the timing of various expenses.

Another way is to void the loan agreement, which the administrators suggest may be possible because, in their opinion, it is “probably a non-commercial transaction”, although that again depends on further investigation and the opinion of a court.

The first option for creditors will be to liquidate Metigy, which opens those avenues. A vote on that will take place this week.

Fairfull, who did not respond to calls and text messages seeking comment, has been helping administrators.

Charging

“Mr. Fairfull has been helpful and fulfilled his duties in assisting the administrator and he and his attorney have been available and in regular contact with us during our appointment,” said Cathro.

Even before Metigy went into administration, Fairfull had repaid millions of dollars of the loan, with the last repayment in July bringing the outstanding balance down to $4.76 million. Refund discussions between Fairfull and administrators are ongoing, but it seems unlikely that he will retain ownership of the trophy.

Between the two properties there are mortgages for $12.74 million. Based on that, and an estimate that the properties are now worth less than Fairfull paid in a bull market, the managers’ view is that there is just over $3 million of equity left in the properties.

Fairfull’s other assets are unclear, but there is likely to be a limit to any claims against him.

“The director’s attorneys have advised that he is likely to file for bankruptcy in the near future,” the administrators’ report says. “If this occurs, we would be limited to the funds that are available in the bankruptcy estate.”

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