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.
Leaving the investigation to toothless ASIC is pointless. The Federal Police need to be following this up quickly and lying charges where appropriate. When these people are on remand it might become easier for them to remember which offshore bank accounts that 230 mio in lying in.
Starting throwing these people in jail. No wonder it keeps happening, ASIC and everyone pussyfoot around when it’s already clear there has been fraud and financial abuse. It’s not rocket science, where’s the accountability it’s literally theft. Glad I got out of my fund and control my own super. Others need to do the same, don’t trust any of these funds.
Based on a forensic review of the publicly available documents from the liquidators, there are several underlying patterns and emerging risks in the Falcon Capital liquidation that may not be immediately obvious to unitholders and general observers.
Key Unseen or Under-appreciated Patterns
1. Systemic Overvaluation of Illiquid Assets
The book value of $474m in FGMF’s investments is highly questionable. Many assets were illiquid, early-stage, non-income-generating, and non-arm’s length.
Liquidators noted that “significant shortfalls to book values are expected”, with the likelihood that many assets are not recoverable at all.
Despite this, directors previously asserted 100% recoverability in their ROCAPs—a red flag suggesting potential misrepresentation.
2. High-Risk Related Party Dealings
Approximately $68.9 million in investments were made to related parties of directors, notably entities linked to Mr David Anderson.
There is a pattern of investment decisions lacking independence, proper governance, or conflict management.
ASIC and Liquidators are actively investigating breaches of director duties, including undisclosed financial interests.
3. Potential Breach of Trust Deed Obligations
The Liquidators suspect intermingling of trust assets, poor record keeping, and possible use of one fund’s capital to support losses in others—a serious breach under Australian trust law.
Separate trust entities (some “dormant”) still exist but may have no segregated assets, undermining their standing.
4. Use of Platforms to Obscure Investor Control
A significant proportion of investors entered via platforms (e.g., Netwealth, Diversa). This may have created structural opacity, reducing investor scrutiny and allowing misleading marketing strategies to go unchecked.
Liquidators emphasise that many unitholders are not direct holders, which complicates standing in potential legal action.
5. Asset Concentration in Unrecoverable or Insolvent Entities
Investments totalling $58.7 million are tied to companies that are themselves in external administration.
A further $242 million is tied up in offshore investments with uncertain enforceability, legal jurisdiction issues, and valuation doubts.
6. Elevated Liquidation Complexity and Duration
The Liquidators forecast a multi-year process (likely >3 years) due to:
– Overseas recoveries,
– Volume of legal proceedings,
– Difficulty in substantiating valuations,
– Director non-cooperation,
– Fraud or mismanagement investigations
ASIC are experts in turning up after the car crash and blaming others and Advisers. Ring the Police Station and report your house being robbed and greeted with a yawn and we’ll turn up tomorrow is a safe role for ASIC.
The first I heard of these people were in July 2023. The Advice was terrible and the person followed my off the record advice to remain in their current retail super fund.Thankfully they followed my advice
However, trying to save others, notifying ASIC is a nightmare and impost. ASIC were just not interested.
Hahaha, you know them all too well!
What about our other precious gems that are here to ‘protect’ us like AFCA & the AFP? Privatised or completely unreachable.
Learning this under the age of thirty absolutely shattered me.
It’s a sad reality that so many will face soon. You don’t come back from it once you see it either.
The scam lives on without shame. It’s a national embarrassment.
So where does that leave us little people …we worked hard to get our retirement fund in place & just like that poof its gone …we are 57 & 56 what chance have we got to retire now ….Heads need to roll for this its not fair ….Financial adviser & Super company need to be held partly accountable also
Maurice Blackburn lawyers have published a blog on their website which may be helpful. Search “shield” on their website to find it.
As one of the now 12000 people actually affected by this scandal, all I can add is that this will not be the only example at play in the wholly corrupt Financial Services industry. Time to really get your act together and root out the criminals – or run the risk of capital flight from your stock in trade.
ASIC, APRA and the new Federal Goverment are all on notice here. Less said about the liquidators the better: chancers.
I am currently in dispute with first guardian Master fund as all my superannuation is currently held by them, as a construction worker for the last 25 years I thought that when I was ready to retire last year I would at least have something for my future but no,the greed of Mr Anderson and his cohorts has left thousands of people including me to ponder our future, totally unfair, so why isn’t the mighty so called Australian government stepping in and giving everyone their entitlements, after all they made every hard working Australian start getting into superannuation, so instead of our so called government sending billions overseas how about you look after your own people
Great call bud. I’m in the same boat feeling very upset.
All of this points towards criminal behaviour and subsequent product failure. Why this gets pinned on Advisers, who have to pay for this via the CSLR, is a farce.
Couldn’t agree more- The platforms, rating agencies, regulator all hadn’t a clue that this fund was acting inappropriately. This is a failure on those who are responsible for holding managed investment schemes to account.
And so no MIS should ever fail right? The Platforms and Ratings Houses, and/or ASIC, will protect you from the duds?
Also no shares should ever go broke either. The ASX should protect you from that as well.
Goodness.
When this story is out in full we’ll be back to the lessons from the GFC – in particular the lessons from the collapse of Basis Capital (amongst other MIS).
The Adviser and their AFSL is responsible for the advice.
Structural independence should be a mandatory requirement both for retail and wholesale managed investment schemes.
All too often these issues arise when the fund manager is the same entity or group of companies as the trustee/RE, particularly for pooled/co-mingled schemes.
Why is no one reporting on the 43% shareholding in Australian Food and Farming?
This entity owns tens of millions of dollars of farmland used for growing crops in Western Australia. It could be liquidated quickly.
Its interesting with an ASIC search to see the other directors and shareholders of this company are a Norton Rose lawyer and a manager of NC Group.
I would say there’s a lot more of this to come out in the wash!
As I read this, I am certain of the following.
I’ve had absolutely zero to do with these people, their entities, investments, licensing, auditing or otherwise. yet I am equally certain my clients and I are currently paying and will continue paying for this for as long as I remain a regulated adviser.
Through my ASIC fees, CSLR, PI etc.
It makes one wonder why we bother with staying inside a regulated environment?
The scheme promoters get rich, the liquidators get rich, the regulator keeps getting paid regardless, the government doesn’t have to find a cent. Meanwhile decent hardworking clients who do the rigt thing by seeking regulated advice are penalised. The adviser who remain inside the tent of regulated advice are penalised.
Socialised losses is one thing, but when you concentrate the punishment into the few people doing the right thing you are simply creating a disincentive to do the right things.
Which moral compass failed ethicist came up with this scheme?
Funny how shouty the ethicists were post Royal Commission.
Where have they gone?
What a great read seeing a Lambo flitting around knowing full well that advisers:
– Pay ASIC levy’s every year to try and avoid exactly this
and;
– Will pay again through the CSLR
This is a broken system. Canberra has failed miserably.
It is about time that ASIC and the Liquidators just did their job and stopped playing this out in the Media with half baked stories that are not always factual.
ASIC needs to finish the Investigation that has cost Millions (paid for by the industry through funding levies) and either charge the Directors, RE’s and Platform Trustees as well as advisers who gave inappropriate advice at the time and the Liquidators have a simple job identify and take charge of the assets and then pay out the Fund Members and Creditors.
Until then both ASIC and the Liquidators should refrain from constant media bites.
Can tell what ASIC is really after here – PR wins and the media spotlight. The industry would be better off without them and self-regulate