Over the weekend, The Australian reported that investors in Keystone Asset Management’s Shield Master Fund had potentially funded New Quantum Holdings’ acquisition of 80 per cent of Morrison Securities from Sequoia Financial Group.
Sequoia, which is the parent company of InterPrac Financial Planning, sold the majority of its stake in the trading platform to New Quantum in March 2023 for $40.5 million.
The deal was structured into four stages, with New Quantum paying an initial deposit of $1.5 million at signing, $9 million later that month, then two $15 million instalments at the end of May and August that year.
Beaconsfield Capital had been New Quantum’s main financial backer; however Keystone had provided a $15 million unsecured loan to the firm in mid-2023, with The Australian reporting that the injection of cash was key to keeping the deal alive ahead of the final payment date of 31 August.
The Australian Financial Review reported last year that Keystone calling in the loan sent New Quantum into receivership, with Beaconsfield being the only secured creditor.
According to the Keystone administrators’ report from November last year, the money for the loan to New Quantum came from a smaller fund under the Shield Master Fund called the Quantum PE Fund.
Keystone was also the trustee of this fund, and its only investments identified in the administrator’s report are the $15 million loan and an investment in Tickled Pink International – the parent of four café businesses owned by Rashid Alshakshir, who ran a number of marketing firms that conducted lead generation services for Shield and First Guardian.
Given the result of Keystone calling in the loan, the liquidators do not expect any return from the investment.
While InterPrac authorised both Ferras Merhi and Venture Egg, which had directed client investments into the Shield Master Fund, Sequoia told ifa in a statement that it was “not involved in the loan arrangement between Keystone and New Quantum”.
“Sequoia sold Morrisons Securities to New Quantum on standard commercial terms. How New Quantum funded the acquisition was its own responsibility, and not something Sequoia had visibility over,” the company said.
“It is important to clarify that the owner of New Quantum – who facilitated the Keystone loan – is the same entity that operated the superannuation platform which accepted member funds into the Shield Fund.
“The relevant connection to the Shield Fund lies with that platform and its trustees, not with Sequoia. Sequoia and InterPrac were not involved in the Keystone loan arrangement, product approvals or investment decisions within the New Quantum superannuation platform.”
In May, InterPrac cut ties with both Merhi and Venture Egg, with the licensee ceasing its authorisation of both parties as of 31 May.
Investors exiting Sequoia
The details of the loan funding are not the only heat facing Sequoia, with a pair of substantial holders reducing their stake in the firm.
Acorn Capital was the first to significantly reduce its holding, disclosing on 13 June that it was no longer a substantial holder following a series of trades since April.
The second was the Australian Wealth Advisors Group (AWAG), which had only bought a significant chunk of Sequoia in February this year.
On 15 July, AWAG disclosed that it had reduced its ownership stake in Sequoia from 18 per cent to slightly above 15 per cent.
While AWAG did not wish to comment on its individual trading decisions, a spokesperson for the firm told ifa that there are “challenges ahead” for Sequoia.
AWAG is no stranger to investing in firms related to major collapses, having held an 8.3 per cent stake in Dixon Advisory parent company E&P Financial before it delisted from the ASX late last year.
The firm’s executive chairman, Lee Iafrate, told ifa sister brand Money Management in November 2024 that he was disappointed AWAG would not benefit from the turnaround in the firm’s position.
“E&P was emotional and had a history of failure. It was one of Australia’s worst financial scandals. It was a nightmare, and pretty horrendous how it happened. But buying the shares was a profitable exercise in the end. We got a 23 per cent return,” he said at the time.
“It was not the bonanza we hoped for as we had internal valuations of 60–65 cents per share which would have been a 40 per cent return, but 23 per cent is still a respectable achievement.”
However, the firm’s purchase of E&P shares was towards the tail end of its woes, rather than what appears to be the early stages for Sequoia, which could be on the hook for any advice failures related to the Shield and First Guardian failures for firms that it authorised.
At the time of publication, Sequoia’s shares were trading at a three-month low of $0.30.
Looking through the Sequoia history of structured investments on their website, can’t seem to find a positive result anywhere, so no doubt these have been sold to unsuspecting consumers via their advice channel
“buying the shares was a profitable exercise in the end”.
Because the guilty parties were not made accountable for their actions. Innocent advisers were financially punished instead.
CSLR has enabled a consequence free path to profit from corporate crime.
100%
yeah i agree that was what stood out for me. Profiteering from a business whose clients who have been ruined is in my opinion from gordon gecko types ie greed is good and have no ethics.
This is an unmitigated disaster!
And what is happening with Sequoia purchasing shares in Centrepoint. Is this a precursor to phoenixing the company and using Centrepoint to house the advisers? What is ASIC doing to prevent this being another burden on an already broken CSLR?
but i see the ceo is also a director of the AIOFP who are fighting for our rights? irony.
You have to ask yourself not only why they invested in Quantum PE but more so how the hell they ended up in an unsecured loan to a company that then bought an asset from a conflicted party in SEQ – surely that’s not conincedental? Not to mention the clients funds were administered by the New Quantum platform that bought Morrisons !
Follow the money, and uncover what happened! These are the life savings of every day Australian’s, and this “nothing to see here” approach simply doesn’t cut the mustard! This investigation by the Australian is uncovering more and more, and I’m interested to see how it is even possibly defended. Is this type of event even survivable by Interprac and Sequioa? Why should unrelated financial advisors that haven’t done anything wrong foot this bill, this stuff is all too incestuous!
The Sequoia share price is down as much as 20% today. Finally the ‘nothing to see’ line has been challenged. It is time the real story came out here. The other thing to mention is that Sequoia run a super fund called Australian Practical, which had First Guardian on it’s investment menu. There are so many interesting links here. We should ask how much Frist Guardian money has been invested through the Australian Practical fund.
Yes, there are a lot of related party transactions here and Sequoia and Interprac are right in the middle of it. Hopefully as more information comes to light Sequoia and Interprac will be able to compensate the 1000’s of investors whose life savings have been stolen! I can see why investors in Sequoia are now jamming the exit as the lid on the can of worms is only just opening!
So Interprac/ Sequoia is one of the very licensees to approved Shield for clients, who has Keystone as RE. Then Keystone lends money to a firm to help buy Morrisons from Sequoia. At a bullish price also.
These remarkable coincidences make the ‘nothing to see here’ comment from Sequoia somewhat hard to swallow.
Interprac are continually denying any involvement (I have a letter from them saying themselves or their member FA had no knowledge of the position of Shield), but it is becoming quite clear with what is transpiring through this Morrison sale, Quantum PE, Keystone loan that they are involved right up to their eyeballs. Interprac / Sequoia cannot possibly survive this when all is revealed.
The Australian has been following this and in one piece it stated SQM was an authorised rep. of InterPrac.