The founder of failed brokerage firm Sonray Capital Markets has been jailed for six-and-a-half years for his role in the $46 million collapse of the company.
The Victorian Supreme Court found Russell Johnson guilty on April 17 of a number of offenses, including false accounting, theft and deception and conspiracy to steal. Johnson had pleaded guilty to the charges in October 2013.
Johnson’s brother-in-law and former chief executive of Sonray, Scott Murray, was jailed for five years in October 2011 after being found guilty of 10 charges brought by the Australian Securities and Investments Commission.
Sonray Capital Markets was established in 2003 and collapsed in 2010 with debts of $46.7 million, resulting in 4000 clients’ accounts being frozen. The company provided advice on contracts for difference – stock market betting based on whether shares or other financial transactions will go up or down.
Johnson was sentenced by Justice Cameron Macaulay, who said Johnson’s behaviour was a serious example of the crimes charged and was carried out with “a sophisticated degree of orchestration and planning”.
However, Justice Macaulay found Johnson was motivated by a desire to keep his company going. “The path you took was the dishonest one but I accept that it was not motivated by personal greed,” he found.
The charges against Johnson related to the withdrawal of funds from Sonray’s clients’ trading accounts from unfunded deposit entries between 2007 and 2010. The money was then used predominantly within the business or for personal use.
Warfield and Associates chief executive Brett Warfield told SmartCompany Johnson’s sentence is consistent with other fraud cases involving high dollar amounts. “The higher the dollar values of the fraud, the longer the sentence,” said Warfield.
Warfield said there is a danger for investors who place their money with sole traders, as these companies don’t have the traditional structure of a board of directors and the safeguards that come with that. “If the key man at the top goes rogue, there’s not a lot they can do,” he said.
A situation where the directors of the company are related to each other is also a “warning flag”, said Warfield. “There is a potential conflict of interest and they may have less balanced judgement if they are related.”
Johnson has been sentenced to serve a minimum of three-and-a-half years’ prison before he will be eligible for parole.