In a statement on Tuesday, the corporate regulator said it had alleged Mr Scholz was carrying on a financial services business by providing financial product advice, regarding share trading on the ASX, without a licence. The regulator alleged that Mr Scholz engaged in various areas of financial services by delivering training courses and seminars about trading in ASX-listed securities, during which he made recommendations about share purchases; promoting those courses and seminars on Twitter and Instagram; and by making share purchase recommendations on private online forums (that he administered) and on Instagram.

“ASIC has warned those who discuss financial products and services on social media that they could be the subject of enforcement action if they are carrying on a business of providing financial services without a licence,” said ASIC deputy chair Sarah Court.

“Financial services laws exist to protect investors if something goes wrong. The individuals who paid Mr Scholz for his tips, to attend seminars or access private online forums, as well as those individuals who purchased shares based on his recommendations or statements of opinion, did not have the benefit of these protections.”

According to ASIC, Mr Scholz’s business to paying subscribers included subscription or membership fees of $500, $1,000 or $1,500; offers of various levels of share trading training, referred to as ‘Stage 1’, and ‘Stage 3’ packages, which were marketed as introductory or advanced seminars; offers of individual one-off share trading suggestions, or tips for a fee; and the Stage 2 package providing one year’s access to a private chat site, named ‘Black Wolf Pit’, using the online communications platform Discord.

The matter will be listed for a case management hearing on 31 January 2023 to progress to a further hearing to determine remaining issues, including any orders restraining Mr Scholz from carrying on a financial services business without a licence.

ASIC wants to see Mr Scholz prohibited from promoting or carrying on the business of providing recommendations or statements of opinions about the purchase of shares in return for payments of money or other benefits.

Moreover, the corporate regulator is asking for Mr Scholz to be barred from directly or indirectly carrying on any financial services business in Australia, as well as from receiving, soliciting, transferring or disposing of customer funds received in connection to providing recommendations or opinions about the purchase of shares.

In handing down the judgment, her Honour, Justice Kylie Downes said, “... the financial product advice given by Mr Scholz formed an integral part of this business. The advice which was given by him was not a one-off but formed part of the continuous and systemic business operations by which Mr Scholz derived profit".

The judge noted that through his lifestyle posts and ‘life story’ posts on the Instagram account, Mr Scholz had established a reputation as a successful share trader who had the ability to identify worthwhile companies in which an investment should be made. “It did not matter that the stories did not contain any overt recommendation to acquire the shares: it was enough that Mr Scholz referred to a company or its share in the stories, which was usually done in a way which indicated that he liked that company,” her Honour, Justice Downes said.