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Smooth Talker: Lakeba entrepreneur Giuseppe Porcelli takes tech punters for a rude ride

by Michael West | Nov 21, 2022 | Business, Latest Posts

It was a Monday afternoon in late February when John Barilaro came to Sydney’s iconic beachside suburb of Manly to do a deal. He was suing YouTuber Jordan Shanks in a high-profile defamation case at the time and was soon to be embroiled in the scandal over the New York trade commissioner post – a role he created, then subsequently filled with none other than himself.

A few days later the former NSW deputy premier was to accept an executive position with property developer Coronation Properties, again engulfing him in controversy (as property developers lobby state and local governments for planning approvals). But he was keeping his options open.

So it was that Barilaro arrived at the offices of Lakeba Group on The Corso, Manly’s tourist strip, to visit the founder and chief executive of tech company Lakeba, another colourful Australian of Italian descent Giuseppe Porcelli. All Lakeba employees were asked to be present for the “VIP visit”, looking sharp.

For Porcelli, this was but one among many visits from politicians. From Tony Abbott to Victor Dominello, Matt Kean and Karen Andrews, he was fond of hobnobbing with politicians and various people of influence. He wanted the former PM and Manly local on the board of Lakeba. The native ”from the tough streets of Naples” even claims to have received a business award from none other than former Italian prime minister Silvio Berlusconi.

The two men, John and Guiseppe, share not only an Italian heritage and an entrepreneurial charisma but also a reputation for being colourful identities. 

Yet little was Barilaro to know at the time but Porcelli was even more colourful than he. A flamboyant man, the Maserati-driving Porcelli – and his self-described “global venture catalyst” company Lakeba – are in the crosshairs of angry creditors who say they invested with Porcelli on grand promises but lost money.

In fact, Michael West Media has contacted many of Lakeba’s investors over recent months but has been unable to find one who has made any money at all. Porcelli declined to comment for this story, even after his PR man had been offered for one week straight the opportunity to identify one happy investor.

“He’s promised the world but delivered an atlas,” said one.

“Global venture catalyst”?

He surely talks the talk: claiming to preside over a “global enterprise” given to “accelerating businesses towards a better tomorrow”, Porcelli’s catch-cry, one of an abundance of catch-cries, is “Conceive Create Commercialise”. “Low risk, high return framework” another.

Porcelli’s expertise however would appear more in the “conceive” phase than in “creating” or “commercialising”. And the risk profile, unless we are missing something in this investigation, is more in the tradition of a “high risk, no return framework”. 

The formula for success for the self-described “Midas of the software sector” is to talk up his “galactic technology” to high net worth individuals, spruik the latest venture in a friendly financial press, and drop big-brand names such as Microsoft, Huawei, Walmart and Tesco as Lakeba’s “business partners” into the sales pitch. 

The latest money raise to attract the attention of the press is Bricklet, an online marketplace where buyers and sellers can trade parts of houses and apartments. He even talked some seed capital out of blue-chip property juggernauts Stockland and Mirvac. Porcelli’s aim is for Bricklet to springboard Lakeba into the big league of minority investors, the ASX.

Ocean view, or really a carpark view? ASX property float a tough sell

 

There has been no action by corporate regulators since we revealed here in June that Bricklet was marketing properties with no title and claiming at least one had ocean views when it looked over a carpark. Indeed, Porcelli and co have blithely stepped up their sales pitch, now asserting in an AFR Exclusive “Bricklet uses blockchain to settle housing sales instantly”.

Porcelli declined to respond to questions for this story, and to be interviewed, but a number of his investors have spoken on background and claim to have been misled.

Three have taken Porcelli to the Supreme Court of NSW to compel Lakeba to release documents relating to their investments. All say Lakeba is in breach of its corporate governance and disclosure requirements.

Looking at the Porcelli actual performance for his investors there is no evidence to support the entrepreneur’s claims that he is a “prolific business builder” and “the only answer for the new tomorrow”.

By using technologies like quantum technology, artificial intelligence, machine learning, virtual reality and blockchain, Giuseppe is the only answer for the new tomorrow.  

A better answer for the new tomorrow

On his website, Porcelli claims 16 high-tech ventures – “leaders in their space”. Of the 16, he claims to have made “three exits”. In the parlance of the venture capitalist, an “exit” is the successful sale of an investment with a return to shareholders. 

The expectation in VC world is a “ten-bagger”, a return that is of ten times the capital outlaid. An investigation by MWM however has found no successful exits, not even a “one-bagger”.

Lakeba claims “3 exits” on its website: Deals 4 Sport, Paid by Coins and AirCrypto. It also claims two “investments”: Appreci and LÜM.

“I am not sure what has happened to Appreci, but LÜM was wound up some months ago and so the shares are worth zero,” says one of Porcelli’s investors.

The claim of 3 exits is used to showcase the “success” of the Lakeba model in press articles and in presentations. “It is part of the “boilerplate” marketing blurb used wherever possible. The problem is, of course, that it is largely false,” says the investor.  

Deals 4 Sport

Deals 4 Sport, the first claimed “exit” was near the beginning of the Lakeba journey in 2015. It was a tiny business that basically helped raise funds for local sporting teams by selling wine. 

“It was not really scalable or of any interest to Lakeba going forward and so they sold it for $50,000 to the wife of a director, Craig Holland, who then shut it down completely. Holland left Lakeba with another director, Frank Brown, four years ago. The board has been quite the revolving door. 

“I don’t think it was a positive exit at all. There are questions in regards of the accounting, related party transactions”.

As far as we could find, Deals 4 Sport is the only exit which made any return for investors, and then only fleetingly. Then again a $50,000 sale is hardly the stuff of venture capital legend as one investor put it.

Paid By Coins

The second exit claimed by Lakeba is Paid by Coins. This is the big one. The prize was control of a company on the ASX. What Giuseppe did here was to sell PBC for shares in the ASX company Mobecom, a “backdoor listing” on the sharemarket.

The ASX forced them to unwind the whole deal when Mobecom and eventually got the shell of PBC back, worthless. Again, there was an exit, briefly, but was there a return to shareholders? No, according to two sources involved with the deal because it was soon reversed. 

“The announcement of $20m is illusory because, while he got $20m in value in shares, the shares plummeted and he had to give them all back anyway. Zero return,” says an investor.

The third exit claimed by Porcelli is Air Crypto. This was a joint venture with Mobecom, which paid for the development with shares. It was a $1m deal, a joint venture, not an exit. It too was unwound.

MWM has spoken to a number of Lakeba’s investors and joint venturers and have found none have made money. That’s not to say that the ideas are the problem. Even his detractors say Porcelli comes up with good concepts. 

The problem is with the structure of Lakeba which locks in investors with little visibility on what is happening with costs and foreign “service agreement” and so forth. His modus operandi is to give investors shares in Lakeba’s subsidiaries. Each of the ventures is majority controlled by Lakeba which is in turn controlled by Porcelli. Lakeba charges service fees and so forth to the subsidiaries. Disclosure and transparency however are poor.

Despite the demands of its investors, Lakeba has still not held an annual meeting. There has been little disclosure or transparency let alone accountability by Porcelli.

The other corporate phenomenon here is exaggeration. Paid by Coins for instance was a new venture that allowed consumers to pay their day to day bills using crypto currency. 

“There are a number of similar businesses including Living Room of Satoshi Pty Ltd, so it wasn’t very innovative,” says one observer. “It was really just a platform that automated the exchange of crypto for fiat currency to pay a nominated bill by BPay. It made a small margin on the transactions, so it would take a huge number of transactions to ever make any real money. The business was therefore high revenue, very low profit.”

The opposite therefore of low risk, high return asset profiles touted by Lakeba’s marketing materials.

Further to Porcelli’s MO is the use of financial media, unfailingly cooperative in telling Giuseppe Porcelli’s stories. It helps get the investors in the door. In the case of PBC, says one: 

It involves Lakeba trying to take control of a public company (Mobecom, now Gratifii) by selling it a dud business at a massively inflated price in exchange for shares. It was only stopped because the new CEO of Mobecom/Gratifii Iain Dunstan, pushed back after he replaced the original CEO”.

Black hole

“The deal was all about Giuseppe getting control of Mobecom, so everything was for shares in Mobecom.  He also wanted a big headline to show the wonderful success he was achieving at Lakeba.

“The deal was for a total of up to $20m (at least it was announced as a $20m deal). There was an initial $6m of shares up front in 2019, but this was done at 17c a share. By June 2019 the share price was substantially less (around 5c) but he never told his shareholders or potential investors about that drop in value, still claiming the full $6m as per their accounts for that year.”

This is part of the case against Lakeba being run by forensic accountant and investor Tony Halfhide and his colleagues in the Supreme Court.

“The second part was an “earn-out” of up to $14m based on performance, but it was a shonky formula that meant he could annualise any consecutive two months performance.”

Did Porcelli push his own personal transactions as well as Lakeba transactions through the platform in a two month period to achieve the highest earn out?

Porcelli was unavailable for comment but the share price movements were a cause for concern. “The artificial spike was obvious when you look at the months before and after,” says an investor.

In any case Giuseppe was still raising capital in late 2019 and used the $6m in 2018-19 and the $14m in the 2019-20 projections to show significant revenue to justify the valuation of the business in the capital raise.  

“He did not disclose that the Mobecom shares had dropped in value from 17c to 5c, or that Mobecom was suspended and couldn’t trade, or that the whole Paid by Coins deal was being unwound in any case.”

It was a $20m hole which was never disclosed. I have no idea how he has backfilled that hole, but that is part of the current court action against Lakeba.

By January 2020, a month after raising capital from his investors, the whole sale of Paid by Coins was unwound, with the company being returned to Lakeba and then wound up.  

“There has, in effect, been no exit of Paid by Coins,” says a source close to the transactions. 

In the case of AirCrypto, the development fee was $1m to be paid in shares again. “The actual development costs were much less,” says the source. 

 “This deal involved a joint venture between Lakeba and Mobecom, but everything was unwound at the same time as the Paid by Coins transaction. In this case, however, Lakeba negotiated to keep some of the shares it had been issued for the development work as a compromise (that is why it is still on the Mobecom share register).  

 “In addition, Giuseppe demanded part of his Mobecom salary (80K) be paid in cash to him as part of the settlement.  He should never have been able to charge a personal salary to Mobecom as he had a full time job with Lakeba, and so selling his time should have benefitted Lakeba and not him personally.”

 So the reality of the “3 exits” is one exit for $50k. And the reality of this self described innovator at the forefront of global technology transition is that Giuseppi Porcelli appears to enjoy a rich lifestyle at the expense of his many investors. This is not to impute wrongdoing. 

 “If he was out of the picture this business could be profitable,” says a former director of Lakeba. Efforts however by some investors to push the idea that an independent party be appointed as administrator to chrystalise some value have come to nought. 

Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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