Lion Property Group developers John Sader, Garry Pesochinsky deny running a Ponzi scheme
The directors of a luxe property group which netted $120m from investors in Melbourne and Brisbane have revealed what will happen next for them and their investors.
A luxury property group that promised 12 per cent returns in Facebook advertisements for top-end homes in Melbourne and Brisbane has blamed legal action and building delays for their demise.
Lion Property Group developers John Sader and Garry Pesochinsky now say they were likely to go into personal bankruptcy after the company that had netted $120 million from investors was ordered into liquidation.
But they denied it was a Ponzi scheme.
The pair claim they were only paying themselves $3000 a month while they fought legal battles with investors over their high-end homes across the country.
The Victorian Supreme Court appointed KPMG as liquidators this week, with 18 luxury developments now to go under the hammer in mortgagee fire sales.
Angry investors hailed the court decision as a major win, but the developers say that investors would now get almost nothing back.
The pair said that a delayed development in Camberwell, Melbourne, was the straw that broke the camel’s back last year.
The four townhouse development, worth as much as $14 million on completion, was now on the market for $7-8 million as an uncompleted project.
“This was not a Ponzi scheme,” Mr Sader said.
“These investors are probably looking at single digit returns on the dollar. These projects were at their most vulnerable phase when these actions were brought. It’s just senseless and sad.”
Mr Pesochinsky said that the company would have been able to trade out of its problems except for building delays because of the Covid-19 pandemic and rising interest rates.
“Three year periods to build are four to five years now,” he said.
“If this court matter did not occur at the end of last year, we said you just need to work with us, we’ve got a number of avenues to work through this and recover the position.
“We had builders on standby to finish projects.”
He claimed that as much as $50 million would have flowed to the company this year, with drops in interest rates further spurring demand.
Mr Sader had been in property development for 10 years, while Mr Pesochinsky had spent two decades in property.
They were not personally liable for the company’s debts, however they both said they were highly likely to go personally bankrupt because they had not been paying themselves regular wages for at least six months.
The company targeted investors via Facebook and Instagram advertisements, with punters pouring in millions on the promise of 12 per cent returns.
They were also offered advanced payments each month, with full capital returned on the sale of the luxury projects.
As much as $23m of the $122m the company raised between 2018 and 2024 was paid out by the company in the monthly distributions.
However, Mr Sader said that delays on the townhouses at Cornell St in Camberwell had led the company to stop the advanced payments to remain solvent.
Many of the company’s properties had multiple mortgages and there was a further $62m in secured debt taken out on top of the $122m it had raised from investors.
Those delays led to fears among investors who launched legal action in Victoria’s Supreme Court with the help of Michael Landy of business accounting firm.
Mr Landy said the Australian Securities and Investments Commission should investigate the company given the court’s findings this week.
Investor Steve Danzig said the damage caused by the company was “life changing and irreversible” for some who had poured their savings into the scheme.
