Lambo limbo: First Guardian liquidator’s report sparks Ponzi scheme fears

Sometimes it’s hard to decide which side of a dispute is painting an accurate picture – often the truth lands somewhere in the middle. When everything comes out in the wash, that might be the case for the vastly different descriptions of the recoverability of First Guardian Master Fund’s investments.

On one hand, the directors of the fund’s responsible entity, Falcon Capital, told liquidators the investments are recoverable at “100 per cent of book value”.

Those liquidators, Ross Blakeley and Paul Harlond of FTI Consulting, expect “significant shortfalls” and a timeline for creditor and unitholder dividends ranging anywhere from 12 months for an interim payment to “a number of years” for a final distribution.

In this case, perhaps it’s safer to assume the party that didn’t spend $548,000 of company funds on a Lamborghini Urus is more reliable.

Ironically, the 2023 supercar – which was in the possession of Falcon director Simon Selimaj – looks to be the easiest asset to liquidate.

Set to go up for sale through Slattery Auctions on 17 July, the liquidators have pegged the likely return at around $350,000 to $400,000.

All told, according to the liquidators’ first report for creditors, the losses could reach $446 million – the net amount invested in First Guardian.

Co-mingling of funds

Unsurprisingly, the issues with First Guardian run much deeper than an exorbitant company car.

While they didn’t outright label the fund a Ponzi scheme, the liquidators said they “observed issues arising from the co-mingling of funds”.

“Money was regularly moved daily between trust accounts to meet redemptions, investment commitments, management fees and other outgoings,” the report said.

“Such funds may not have truly reflected income generated from fund activities and returns from investments made. Rather the sources of those funds may have been from funds raised from new investors.”

This, the liquidators added, “requires further investigation”.

When redemptions weren’t being covered through new investors, they appear to have been delivered on an ad hoc basis at best.

“The liquidators understand that the company has historically allowed unitholders of the FGMF to redeem units in the FGMF on an ad hoc, rolling basis, and that redemptions were not processed in accordance with the pro rata withdrawal offer process set out in the act,” the report said.

“The liquidators’ view, based on their preliminary investigations, is that the FGMF may not have been liquid at the time that the historical redemptions were processed, and that the FGMF is also not currently liquid within the meaning of the act.”

Beyond this, the liquidators said the company may have been insolvent from at least 27 May 2024, when the directors suspended the processing of applications and withdrawals as the firm was “unable to meet redemption obligations”.

Asset holding and likelihood of recovery

Much of the report highlights the scale of investments and loans that involved entities linked to Falcon Capital director David Anderson.

The liquidators said $68.9 million fell into this group, while three Australian-based ventures with investments or loans worth $58.7 million are insolvent, raising “significant doubt as to their recoverability”.

Also described as difficult to recoup is the $242 million in investments and loans in offshore entities, as well as Falcon’s investment in the Chiodo Diversified Property Fund (CDPF) – controlled by the director of Keystone, the responsible entity for Shield Master Fund – through its own First Guardian Global Property Fund (FGGPF).

Falcon – which as a trustee for FGGPF held 62,344,456 fully paid units in the CDPF – entered into a $94 million unit purchase agreement with Asia Pacific Property Holdings LLC (APPH) on 31 March last year, structured as an initial payment of $4 million and six instalments of $15 million to follow.

However, APPH backed out of the deal when the liquidators were appointed and “no instalments have been received”.

The liquidators also detailed that First Guardian Holdings paid more than $40 million to third-party marketers between August 2021 and February 2024, sourced from the fund itself.

Cornerstone Strategic Management, which is related to Ferras Merhi’s advice firm Venture Egg, Osama Saad’s Atlas Marketing, and Rashid Alshakshir’s Indigo Group were all beneficiaries of these payments. All three are subject to asset freezing orders.

It’s too early at this stage for the liquidators to provide a solid projection on how much may be recovered, but FTI has reiterated that “insufficient funds will exist” to meet claims in full.

At least getting some cash back for the Lamborghini seems like a safe bet.