Insider information behind dumping of millions of Pushpay shares - FMA alleges

Name suppression continues for defendant who pleads not guilty to rare charge. Photo / NZME

Insider information was behind the dumping of millions of Pushpay shares just prior to an announcement the company's founder and director was resigning, the Financial Markets Authority alleges.

In February the market regulator filed proceedings in both the Auckland District Court and the High Court at Auckland alleging the shares were sold in mid-2018 based on information not generally available to the market.

The District Court proceedings have one individual facing a single criminal charge, while the High Court proceedings have that individual - and also another who is alleged to be party to the conduct - named as defendants in a civil claim.

At a hearing at the Auckland District Court this morning the individual facing a criminal charge entered a not guilty plea and elected to face trial by jury.

Both individuals were granted interim name suppression in February, with the order extended today at the request of their lawyer John Dixon QC.

Prosecutor Brian Dickey, the Auckland Crown Solicitor, did not oppose the interim suppression order but said he was conceding only an arguable case for the defendants and indicating he would "almost certainly oppose" both applications when they were addressed at a separate, later, hearing.

Judge John Bergsen remanded the individual on bail, with a case review hearing next scheduled for June 22.

Pushpay, listed on the NZX, is a donor management system for churches and charities operating in the US and has seen strong growth in the past few years - pushing its market capitalisation past $1b - as pandemic restrictions forced many religious organisations to digitise their collection plates.

In June 2018 the company announced co-founder and director Eliot Crowther had resigned and sold down his $100m shareholding in the firm. The trades considered suspect by the FMA occurred in the month prior to this announcement.

Crowther's trading was legitimate and he is not a party to the proceedings, the FMA said.

The matter was referred to the FMA by NZX Regulation, the frontline regulator of the New Zealand stock market now called NZ RegCo, in July 2018.

The FMA said Pushpay, which has targeted US churches with technology that makes it easier for congregations to make donations and has offices in Auckland, Seattle and Colorado Springs, has co-operated and has not been the subject of its investigation. The company is also not a party to any legal proceeding.

Insider trading prosecutions are rare and the Pushpay case is the largest in New Zealand history by the value of shares traded.

In 2018 the first insider trading trial in New Zealand's legal history ended with Hamish Sansom, a former executive of transport and technology company Eroad, being found not guilty.

His acquittal came at a retrial after the first trial ended in a hung jury.

Sansom was charged by the FMA after selling 15,000 Eroad shares for about $50,000 just days before its stock price plummeted.

The criminal charge attracts a maximum penalty of five years in prison and a fine of up to $500,000. Civil penalties can be calculated at three times the gain made or loss avoided through the use of inside information.