Russell Johnson, the director of failed broker Sonray, has been sentenced to 6½ years’ jail for defrauding clients of millions of dollars and stealing money from the company before its collapse in June 2010.
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He will serve at least 3½ years before becoming eligible for parole and is also disqualified from managing a company for five years.

Johnson grimaced as Justice Cameron Macaulay handed down the sentence in the Victorian Supreme Court on Thursday.

Justice Macaulay said Johnson and his brother-in-law, chief executive Scott Murray, manipulated the books of Sonray for 30 months ”with a sophisticated degree of orchestration and planning”.

By increasing the value in Sonray’s system of ”friendly” client accounts, Johnson was able to stave off margin calls from its backer, Saxo Bank.

Saxo Bank provided Sonray with the platform to offer contracts for difference – effectively bets on stock price movements – in which the broker specialised.

Because no cash was actually deposited in the bank account Sonray operated on behalf of clients, the accounting move opened a gaping hole in its finances that reached $46.7 million when it collapsed.

Johnson also stole $441,000 from Sonray to pay back a loan from his father-in-law, Swann Global managing director John Murray, that was used to buy a house in Toorak.

Over 11 months, he siphoned an additional $300,000 out of Sonray for personal expenses including credit card debts, private school fees and the mortgage payments.

”Even with this influx of money, your accounts were still regularly overdrawn,” Justice Macaulay said.

He said that as stresses mounted on Sonray and the global financial crisis hit in 2008, Johnson was faced with a dilemma – either shut the company, costing investors their funds and workers their jobs, or take ”advantage of the latitude that Saxo had unwittingly given you” and try to trade out of difficulty.

”The path you took was a dishonest one, and for that you will be punished,” Justice Macaulay said. ”But I accept, generally, that it was not motivated by personal greed.”

The judge said it was important to send a message to others tempted to do the same. He said he took into account Johnson’s co-operation and his remorse over his actions.

Johnson set up Sonray in 2003 after leaving Societe Generale subsidiary Fimat, where he and Scott Murray worked. By 2008, Sonray was in trouble after a ”fat finger” trading error by Murray cost it $700,000 and cost blowouts in ”Project Mojo”, a new trading platform.

Following the collapse and an Australian Securities and Investments Commission investigation, Johnson was charged with 24 offences. He pleaded guilty in October last year after all but seven were dropped.

He pleaded guilty to three counts of false accounting, two counts of theft, one of obtaining financial advantage by deception and one count of submitting a false document to ASIC.

Scott Murray was sentenced to five years’ jail in 2011 after pleading guilty to fraud and theft.

Sonray director jailed for cheating on the books