Corporate watchdog accuses fund manager of running a Ponzi scheme

Investors in a suspected Ponzi scheme now face an anxious wait to find out where their money has gone and if it can be clawed back, as the fund manager’s flashy trappings are sold or frozen.

Ken Grace, managing director of Goldsky Asset Management.

INVESTORS in a suspected Ponzi scheme now face an anxious wait to find out where their money has gone and if it can be clawed back, as the fund manager’s flashy trappings are sold or frozen.

This week more details were uncovered when a court-appointed receiver declared there was a $12.5 million black hole in the Goldsky fund run from Kingscliff, in northern NSW.

It’s the same fund which won an award as “hedge fund of the year” last year after claiming it was making spectacular returns of 20 per cent using algorithms to “analyse behaviour and human sentiment”.

Anthony Castley, from firm William Buck, filed his report in the Supreme Court in Brisbane on Monday, declaring investors in Ken Grace’s Goldsky fund are owed $12.9m but there is only $314,124 in the receiver’s bank accounts.

The report notes that among those invested in the fund are former swim coach Scott Volkers who put in $220,000, former AFL player and assistant coach Simon Black ($80,000), current Essendon AFL player Devon Smith ($100,000), former AFL player Clark Keating ($100,000), former Olympic swimmer Sam Riley ($50,000) and Riley’s husband Tim Fydler ($100,000), as well as Olympic cyclist Robbie McEwen ($50,000) and Melbourne Storm’s director of performance Lachlan Penfold ($127,559).

By scouring Goldsky’s bank statements for 19 months until October this year, Mr Castley has tried to figure out how much investors sank into the fund and how much they have been repaid.

Mr Castley reported that $6.85m had been paid out of Goldsky’s bank accounts, including $852,222 to Mr Grace’s family members, $143,364 on jewels and accessories.

Then there was $120,583 on groceries, $115,502 on cosmetic surgery, $56,019 on beauty treatments, $97,835 on restaurant meals and a further $410,418 on jetsetting trips.

The figures were much higher than those alleged last month by Australian Securities and Investments Commission (ASIC) when it analysed Goldsky’s finances.

And the dizzying spending on luxury accommodation, food, travel and bling has halted following the ASIC action and appointment of liquidator Chris Baskerville of Jirsch Sutherland.

Mr Castley’s report was compiled at the request of the corporate regulator who has accused Grace of running an unregistered managed investment scheme and Ponzi scheme.

The ASIC alleges more than 40 investors are “possible aggrieved persons” and it is now looking at “possible breaches of the Queensland Criminal Code” and “suspected contraventions” of company law, the court heard.

Marketing material filed in court and given to investors said that the fund “will invest in a portfolio of approximately 100-150 listed securities from a universe of global stocks across a range of sectors, and will typically have only a small exposure to cash”.

“The fund uses derivatives, in the form of forward contracts to manage foreign currency exposure,” the pamphlet said.

University economics drop out and former car dealer Grace told investors their money was invested in the world’s biggest economies including the US, Japan, Canada, France, Singapore, Hong Kong, Spain, Netherlands, Norway and Germany.

He told them it was in a spread of health care, financials, consumer staples, industrials, utilities, materials, telecoms, consumer discretionary, IT, real estate and energy stocks.

But ASIC investigator David McArthur told Grace in a formal interview that he was concerned because he could not see any money being paid to stock market trading platforms from the bank accounts.

Grace explained that Mr McArthur was probably looking at the wrong bank account, and that he had an account with trading platform CMC.

Mr Castley’s report shows Grace paid $1.7m to trading platforms over the past 19 months, but only received $870,000 back from CMC Markets and IG Markets.

Mr Castley stated that he could possibly recover $1.7m for investors through legal action.

Mr Castley also said he has placed a caveat over Grace’s $1.87m Kingscliff home, allegedly purchased with investors money and owned jointly with his wife Jane, to prevent the couple from selling it, and Grace gave up his $151,000 Mercedes coupe on November 1.

Investor and Highgate Hill boarding house owner Murray Swan told The Courier Mail that he holds hope that he will get his $100,000 back.

“What if the money is safe? If Grace is a bad investor, so what?” Mr Swan said.

“I have made many bad investments, but what if he is a good investor and the money is safe?” Mr Swan also said money was being wasted “on lawyers” in the Supreme Court action.