Investor files derivative lawsuit over leadership failures tied to AUSTRAC breach
SkyCity Entertainment is again under intense legal scrutiny as a shareholder-initiated lawsuit targets eight of its former directors and senior officers, following the AU$67 million anti-money laundering (AML) penalty issued by AUSTRAC. The case—filed in the Supreme Court of New South Wales—marks a significant escalation in corporate accountability within Australia’s gambling sector and follows a string of similar regulatory crackdowns.
Derivative Action Seeks Accountability for AML Failures
Investor Stephen Wright has lodged an application to initiate a statutory derivative action on behalf of SkyCity, arguing that the company’s former leaders breached their legal duties. The court filing alleges these individuals failed to act with due care, diligence, and in good faith, particularly in their handling of AML compliance between December 2016 and December 2022—the period examined by AUSTRAC in its enforcement action.
This legal structure means that any potential compensation, minus legal fees, would go directly back to SkyCity, rather than the claimant. Wright is being represented by leading law firm King & Wood Mallesons, with litigation funding provided by Litigation Capital Management (LCM)—a notable third-party backer of class actions and shareholder claims.
Who’s Named in the Lawsuit?
Among the eight former SkyCity executives named are:
Graeme Stephens and Michael Ahearne, both former CEOs
Bruce Carter, ex-Deputy Chair
Former legal, risk and compliance leaders tied to SkyCity Adelaide
The lawsuit contends that these individuals either failed to rectify or directly contributed to systemic compliance lapses that led to the casino’s record AUSTRAC fine in 2023. Those failures included inadequate customer due diligence and poor transaction monitoring, violations that exposed the company to significant legal and reputational risk.
Wider Industry Implications
SkyCity’s predicament reflects a broader wave of regulatory enforcement in the Australian casino and gaming industry. Both Crown Resorts and Star Entertainment have faced major penalties and public inquiries for similar failures, with Crown paying AU$450 million in AML fines and Star facing potential insolvency risks from ongoing proceedings.
The case against SkyCity’s former executives also underscores a growing appetite among investors to pursue legal redress for governance failures, particularly when compliance lapses lead to significant financial damage.
What Happens Next?
The case remains in early stages, and no defence has been filed yet by the accused parties. If approved by the court, it would proceed as a landmark derivative action, signaling a firm stance on executive responsibility and corporate governance.
SkyCity, while not liable for legal costs in this case, will be closely watching the proceedings. Beyond potential recoveries, the litigation adds pressure on the company to restore investor confidence and reform its governance structures in the wake of regulatory failings.
In an era of heightened scrutiny, this case could become a bellwether for how shareholder activism and litigation reshape the landscape of compliance accountability in the gambling industry.
