Developer John Palasty is attempting to distance himself from Virtical’s collapsing hospitality empire, stepping down and selling his shares to a man who is a director of multiple failed companies.

Virtical has been rapidly unravelling since The Australian Financial Review revealed two weeks ago that the Tax Office is investigating more than a dozen of its companies over more than $100 million in GST refund claims – a sum that required it to spend $1 billion on development.