The liquidators of collapsed medical cannabis group Melodiol have zeroed in on controversial payments linked to banned director Adam Blumenthal in their hunt for potential recovery actions.
The liquidators of collapsed medical cannabis group Melodiol have zeroed in on controversial payments linked to banned director Adam Blumenthal in their hunt for potential recovery actions.
Former executive director James Ellingford was grilled in the Federal Court on Thursday about $3.2 million of payments in 2021 that led to Mr Blumenthal copping a $850,000 civil penalty and a five-year boardroom ban.
The public examination probed Mr Ellingford for authorising the payment of a total of $2 million to two companies linked to now-bankrupt social media influencer Tyson Scholz. Mr Scholz was then a client of Mr Blumenthal's Sydney-based firm EverBlu Capital.
It was revealed during public examination that $1.66 million was paid to Tyson company SV4T Investments in early 2021 despite it having been de-registered in May 2018.
When asked on Thursday whether he knew that SV4T was deregistered when he authorised the payments, Mr Ellingford said: "No."
The examination also looked at Mr Ellingford, the former audit commitee chair, for giving the go-ahead for $1.22 million of payments to be made to a company linked to Everblu client Aldo Sacco. The Sacco company had provided "strategic consulting services and business development", according to the invoices.
Mr Ellingford said Mr Blumenthal told the board he was using the services to promote the listed group, which raised significant amounts of capital in a tough year after the worst of the COVID-19 pandemic.
But the former audit committee chair battled to recall details of conversations about the arrangements, or what information Mr Blumenthal had provided to him or his fellow directors.
He said Mr Blumenthal oversaw the marketing and promotion of Melodiol, then known as Creso Pharma, as well as its dealings with the promoters. "From a structural and marketing perspective, it was his role to oversee those," he said.
The liquidators last Monday asked the court for permission to serve an examination subpoena on Mr Blumenthal by text message after being unable to contact him at his home in the prestigious Sydney suburb of Vaucluse.
The court was told he was overseas.
Liquidators Cliff Rocke and Jimmy Trpcevski are still hopeful of questioning Mr Blumenthal.
They gained orders on Thursday banning Mr Ellingford sharing details of any questions posed by lawyer Jonathan Shepherd.
Mr Ellingford said he was not friends with Mr Blumenthal, nor in contact with his former boardroom colleague.
Mr Ellingford rejected suggestions by Mr Shepherd that he was blindly following Mr Blumenthal in authorising the $3.2 million of payments along with former chief financial officer Chris Grundy.
Mr Ellingford said there was a level of trust in Mr Blumenthal, a founding director of the company.
He said he was horrified by what later came out as a result of an Australian Securities and Investments Commission investigation, where he was questioned on similar matters to Thursday's Federal Court examination.
"I feel deeply let down by him," he said. "He's been fraudulent in every possible way."
Mr Rocke and Mr Trpcevski were appointed administrators of Melodiol in December 2024 and later became liquidators.
The liquidatorshave struck a litigation funding arrangement. Approved by the Federal Court in December last year, aspects of the litigation funding arrangement are confidential.
The Federal Court found in April 2024 that one of Mr Blumenthal's companies had loaned Mr Scholz $7.1 million to buy Creso shares in 2021 and charged $712,456 interest on the loans. The court found the relationship was not disclosed to the Creso board until September 2022.
It also found EverBlu had a business relationship with Mr Sacco.
Justice Angus Stewart found Mr Blumenthal failed to carry out adequate due diligence about the capacity of Mr Sacco or Mr Scholz to perform their services and failed to document their services.
Justice Stewart also found Mr Blumenthal failed to require detailed invoices from Mr Sacco and Mr Scholz, nor did he question whether they provided value for money.
In the public examination, Mr Ellingford rejected suggestions by Mr Shepherd that he exposed the company to losses by approving payments to the Scholz and Sacco companies without written contracts or details of the work.
"The company's best interest was always in my make-up," he said.
The court has set down June 23 for more examinations.
