The Australian Securities and Investments Commission (Asic) has initiated civil penalty proceedings in the Federal Court against graphite company Magnis Energy Technologies and its executive chairperson, Frank Poullas.

The allegations revolve around Magnis' alleged failure to disclose material information regarding its lithium-ion battery manufacturing facility, described as its "flagship" project.

Asic asserts that Magnis neglected to disclose crucial details about its battery plant located in Endicott, New York, operated by Imperium3 New York (iM3NY), a company in which Magnis holds a majority stake.

The commission alleges that Magnis became aware of inaccuracies in claims made about the funding, automation of battery cell production, and production capacity of the iM3NY battery plant. Asic contends that Magnis breached continuous disclosure laws by withholding this information from shareholders and the market.

Furthermore, Asic alleges that Poullas, as executive chairperson, was involved in Magnis' failure to meet disclosure obligations. As a director of Magnis and a member of its continuous disclosure committee, Poullas is accused of breaching his director's duties by failing to ensure compliance with disclosure requirements.

The proceedings stem from multiple ASX announcements made by Magnis between April 19, 2021, and March 31, 2023, claiming that the battery plant was fully funded and capable of producing significant quantities of lithium-ion battery cells yearly. However, Asic alleges that Magnis and Poullas were aware by January 25, 2023, that these claims were inaccurate, with the plant struggling to meet production targets using manual processes.

Asic seeks declarations, pecuniary penalties, and disqualification of Poullas from managing corporations for a period determined by the court. The matter will be brought before the Federal Court for a case management hearing on a date yet to be determined.

Magnis confirmed in a shareholder notice that it would examine the Asic statement of claim in conjunction with its legal advisers.

The company’s stock dropped 13.79% to A$0.02 a share on Tuesday.