The Federal Court has ordered the winding up of M101 Nominees, as the first of a number of outcomes due to arise from ASIC’s court actions against Mayfair 101 Group and its director.
M101 Nominees, which issued secured debentures known as M Core Fixed Income Notes, was ordered to be wound up on Friday, following an application by ASIC.
The result is the “first final outcome” to surface from ASIC’s actions against the Mayfair 101 companies and their director, James Mawhinney, according to the regulator. The court will publish reasons for its decision at a later date.
The Mayfair 101 Group owes approximately $211 million to investors who bought into its various products, including the M Core Fixed Income Notes, M+ Fixed Income Notes, the IPO Wealth Fund, IPO Capital and Australian Property Funds.
M101 Nominees in particular was said to have raised around $67 million from investors during 2019 and 2020 based on representations that funds invested would be fully secured, when they were not.
Nominees stopped repaying funds to investors in March 2020 and froze interest payments to investors from June.
On 24 September, the provisional liquidators concluded that the company had been insolvent since it began in October 2019, the business model was unsustainable because it was raising funds from M Core noteholders on a short-term basis (predominantly six-12 months) and on-lending to a related entity, Eleuthera Group, for a term of 10 years. M101 Nominees would not have adequate funds to repay noteholders as their investments fell due.
Distributions and redemptions paid to M Core noteholders were found to be funded from money raised from other M Core noteholders, or to a lesser extent, from investors in unsecured debentures promoted by Mayfair 101, called M+ Fixed Income Notes.
The security provided to the Security Trustee on behalf of the M Core noteholders was said to hold little value as it excluded real estate assets, which were the only tangible assets held by the Mayfair 101 Group entities and trusts giving the security.
The liquidators had also ruled the realisable value of M101 Nominees’ assets was negligible and insufficient to repay M Core noteholders’ investments.
ASIC is also seeking orders that Mr Mawhinney be permanently restrained from certain activities, including advertising any financial product and soliciting funds in connection with any financial product. That matter will be heard by the court on 15 February.
The regulator’s acting chair Karen Chester commented ASIC had moved to “restrain Mayfair from promoting these allegedly misleading products” and to protect investors.
“This action is one of several we have underway (under our project True to Label) targeting fund managers not doing the right thing by investors,” Ms Chester said.
“Especially those fund managers preying on unsophisticated investors, such as older Australians and retirees in regional Australia.”
Said Jahani and Philip Campbell-Wilson of Grant Thornton have been appointed as liquidators to M101 Nominees, after previously being provisional liquidators for the company.
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