Chiodo offers deal, Merhi millions in the Caymans, and more funds under fire

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 “unitholder-first” deal, the $110 million of frozen funds in City Built accounts would be released and ETFs 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 unitholders 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 unitholders first.”

While Macquarie has committed to remediating its members, part of that deal was taking over their unitholding 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.