The turmoil at vape maker Chill Brands has intensified following revelations of unauthorised actions and defrauding by top executives.
The company, which has removed chief operating officer Trevor Taylor and chief commercial officer Antonio Russo from the board last week, but kept them on their roles, on Monday accused both of unauthorised activities and financial discrepancies.
In a regulatory filing, the company's newly appointed board of directors said Russo and Taylor, who assumed executive control after the suspension of chief executive Callum Sommerton in April, transferred the Chill.com domain to an account controlled by Russo without board authorisation. This transfer was completed on 31 May.
The general meeting of the company, held on 4 June, has reinstated Sommerton as chief executive, effective immediately, after law firm Fieldfisher said allegations leveled against him around the company’s use of inside information will not be evidenced to a sufficient degree.
At the board meeting on 3 June, Taylor proposed transferring the domain and certain trademarks to Chill North America, LLC, an entity controlled by Russo, and leasing them back to Chill Brands. This proposal faced objections, particularly from the sole independent non-executive director, but was forced through without full disclosure that the domain had already been transferred, the filing stated.
The company added that it has initiated actions to recover the ownership of the domain and there is currently no interruption to the business carried out by Chill Brands on the domain.
Further compounding the situation, nearly $400,000 in unauthorised payments were discovered, made from the company's US subsidiary's bank account to Russo's and Taylor's personal accounts on 3 June.
“These payments were not approved by the board and were not notified to the board at their meeting held on the day. The company's board is seeking a proper explanation from Trevor Taylor and Antonio Russo for these payments, and the recovery of these funds through all legal means available,” it said in the filing.
The company's shares, suspended on 3 June due to the inability to provide a trading update, will remain suspended until a full trading and financial update can be issued.
“We are totally shocked by the extent of destructive behaviour and actions of Mr Taylor and Mr Russo. It is evident that they have not acted in good faith and their actions have been motivated by self-interest rather than for the benefit of the company or its shareholders,” Harry Chathli, non-executive chairman of Chill Brands, said.
“The company has commenced an investigation to uncover if any professional advisers or persons had assisted them in their actions to defraud the business. Shareholders can be assured that the current board will work unceasingly to ensure restoration of trading of shares and seek to regain the positive momentum achieved in the year to 31 March 2024.”
The resignation of non-executive director Eric Schrader, effective immediately from 7 June, adds another layer of change. Schrader will also cease his work as an independent contractor by the end of June. The board said it is actively searching for an additional independent non-executive director, aiming to make an appointment before the annual general meeting in September 2024.
