As Macquarie looks to remove sub-$300 billion fund managers from its platform in the wake of its Shield Master Fund involvement, the tangled mess of the Shield and First Guardian scandals continues to get more convoluted.
Last week, the former director of Shield responsible entity Keystone Asset Management, Paul Chiodo, sought to “make 2,800 Shield investors whole before Christmas” in what can generously be described as an audacious attempt to bypass the liquidators and get money to the investors.
Under what Chiodo called a “unit holder-first” deal, the $110 million of frozen funds in City Built accounts would be released and exchange-traded funds (ETF) potentially worth $210 million would be sold off, with the combined amount used to make investors whole.
He added that the goal is to avoid any money being paid to the liquidators or Macquarie, which has bought out its members’ holdings in Shield.
“The judge has urged us to mediate this matter, and the only settlement that makes sense is to make the Shield unit holders whole,” Chiodo said in the media statement.
“Shield is a unique case because even though it was wound up by ASIC in 2024, and placed into liquidation, it still has considerable assets which must be used in the best interests of the investors.
“The rules of liquidation hold that creditors are paid ahead of equity-holders, however my deal will direct the frozen $110 million and the $210 million in ETFs, to the unit holders first.”
While Macquarie has committed to remediating its members, part of that deal was taking over their unit holdings in Shield.
Millions allegedly moved to Caymans
However, it’s not just Shield that is seeing movement, with further revelations emerging from ASIC’s action against Venture Egg boss and former adviser Ferras Merhi.
When Merhi appeared on Channel 7’s Spotlight at the end of August, he said that despite being engaged in marketing services for First Guardian, he hadn’t made millions of dollars from the deal.
According to Merhi, he never actually received any of the $19 million paid to his marketing firm, claiming that “most of that money is with Google and Facebook”.
“I didn’t pocket this money. It’s not in my pocket. It’s money that was spent on these ads that were being put onto these platforms. They have most of that money, not me,” he said.
Under his version, he, too, is a victim and was misled into believing that Shield and First Guardian were sound investments and, as a result, is “losing everything” like his clients.
It appears he has also been trying that line with ASIC, with Federal Court Justice Mark Moshinsky told last week that Merhi has only been disclosing assets once the regulator has already discovered them.
Among this assortment of undisclosed assets is a US$9.6 million holding in a Cayman Islands company that appears to have an Isle of Man bank account.
Where did the money come from? According to ASIC, it was from companies connected to investments made by First Guardian.
Additionally, the regulator has alleged First Guardian also provided inflated loans to Merhi in order for him to purchase Financial Services Group Australia, which was a licensee he ran while he and Venture Egg were licensed through InterPrac.
Merhi has previously told media that the $6.3 million loan was not, in fact, a loan and there was never an agreement for it to be repaid.
Clime links to Venture Egg
A new connection between a fund manager and Venture Egg appeared over the weekend, with The Australian reporting that ASIC has kicked off an investigation into Clime Investment Management.
On Monday morning, the ASX released a brief statement that “trading in the securities of the entity [Clime] will be temporarily paused pending a further announcement”.
According to reports, Venture Egg sent as much as $60–$70 million into Clime’s Australian Income Fund early last year, while there are also concerns around allegations against private credit fund Secure Bailment Solutions and its connections to Clime.
Wayne Ding, who holds a 10.7 per cent stake in Clime, is also part of the team at Secure Bailment Solutions
The private credit fund faces allegations of directors misappropriating funds, undertaking fraudulent transactions and engaging in unlawful lending.
I don’t know how Chiodo can put this forward. It is not his money. It’s the investors money. It is now and only now the control of the liquidators. It comes across like he is a crusader. The knock on effects of the devastation of the Shield fund is wide and will last in people’s memories and their life experiences for their whole lifetime. It is not only the investors but the ‘some’ honest and unsuspecting advisers that have been banned where there was no self gain that recommended the product in good faith and prosperity, not greed. They can’t get jobs, on the dole. Family separation has occured because of the stress and impact. Selling their homes. Were earning an average salary. Can’t be present for their children. The destruction of business’s and in turn innocent employees made redundant working in these practises that had nothing to do with the shield fund are only some of the knock on effects. I don’t know how anyone with a grain of moral value to be able to hold such an enormous weight on their shoulders that tsunamied across 6000 investors and advisers that thought and were passionate they were providing a great outcome for their clients. To have the devastation of no not a market correction but complete disregard for investing people’s hard earned money. These investors were people off the street that resembled a great social fabric. Kindness and would give someone a dollar who asked it for it. These investors all had the same traits. They would listen and trust. I do hope for the innocent people that had fallen into this scandal that the universe is able to work it out. This is my only belief and the only hope I can lean on. The whole case of the shield and first guardian fund is an absolute mess when you read it in the media. It’s a joke with the merry go round of failings across all in the chain.There is no definitive answer. There is no order. Why? Because there was no controls. I am keen to see if there will be a misapproation of funds as the verdict for the Shield fund, people higher up the food chain getting windfalls from greed and no presence of social conscience as this as not yet been made matter of fact. I look forward to hearing it from the Judge and then the judge to judge rather than finger pointing every 2nd day in the media. Maybe an ethics course for the people that run the funds and the licensees?
What came first before first Guardian?
The Venture chicken or the Venture egg?
Let’s hope all unit holders are repatriated with their funds and all of the scammers responsible have their assets seized and get sent directly to gaol without passing go!
Mass marketing, mass “advice”, massive greed, massive deception, massive lies and massive fraud.
Its now time for massive investigation, massive fines and massive jail time for all involved.
If ASIC fails in getting the outcome every single investor and every single, ethical, honourable and decent Adviser in this country expects then it will be a massive fail.
Over to you ASIC.
There’s only 2 reasons that the disgraceful Merhi has Cayman Island accounts.
One is for tax avoidance purposes, the other is to hide multi millions of fraudulently gained money.
I hope they have got all airports covered well and truly.
The first 3 massive points sounds ike industry super fund advice models.
But this deception, lies and fraud should have been acted upon by ASIC when they were first notified about First Guardian in 2022 but did nothing. Could have saved thousands of Australians
Let’s hope the victims of this scam slowly get their money back and low life’s like Merhi and Chiodo never work in Australian financial services industry again.
Investors being made whole is fantastic. Throw the book at Chiodo still though: examples need to be made of grubs like him and Merhi.
and ASIC think this is the only dud fund where the top brass squirreled away money?
Have they looked at a certain US real estate investment disaster and where money went?