First Guardian’s suspension leaves its investors in limbo as link to developer emerges

A financial services company that suspended redemptions in May has ties to a Melbourne property developer who is fighting allegations he spent millions of dollars on personal expenses.

Melbourne-based property developer Paul Chiodo.

A financial services company that suspended redemptions in May to undertake a restructure – and is still refusing to give investors access to their money – has ties to a property developer who is fighting allegations he spent millions of dollars of investor funds on personal expenses.

Investors in the First Guardian Master Fund and its classes, including the First Guardian Defensive Strategies Class, First Guardian Diversified Strategies Class and First Guardian Growth Strategies Class, were informed in May the fund would be temporarily suspended and would reopen for applications and redemptions by August 1.

This suspension is still continuing and Falcon Capital, the responsible entity for First Guardian, has not yet set a date for withdrawals to resume. A handful of updates since May have sought to reassure investors their investments remain secure and even continue to grow while in suspension.

“The corporate actions untaken within the fund have positively impacted all classes, with investment returns net of fees showing a minimum uplift of between 2.4 and 4.6 per cent,” an October update states.

The initial notice to investors said the restructure would involve corporate action, divestment of “several significant assets”, consolidation of “several underlying funds” into a single strategy, a rebalancing of underlying exposures within each underlying fund and the on-boarding of a new CEO.

View of Melbourne’s CBD. Picture: David Caird

In the same update, Falcon Capital named two new directors to its board: Paul Tosin, listed as a seasoned investment professional, and lawyer Adam Goldner, who specialises in corporate and commercial law. Mr Goldner has since resigned.

Falcon’s other directors, Simon Selimaj and David Anderson, are also the co-founders of First Guardian. Mr Selimaj, under the name Simon Sallka, is First Guardian’s chief investment officer, while Mr Anderson is listed as a portfolio manager.

While Falcon Capital is First Guardian’s responsible entity, it is also listed on Chiodo Corporation’s website as the responsible entity of the Chiodo Diversified Property Fund. Chiodo Corporation’s founder Paul Chiodo is at the centre of a court case concerning Keystone Asset Management, which is in the process of being wound up, and the Shield Master Fund, whose assets were frozen in June, leaving investors in limbo.

Keystone Asset Management is the trustee of the Advantage Diversified Property Fund (ADPF), a wholesale property fund into which the Australian Securities and Investments Commission alleges a large proportion of Shield’s funds were invested.

According to the regulator, the ADPF made loans to various companies associated with Mr Chiodo to fund property development projects in Fiji, Italy, Port Douglas and Melbourne.

Mr Chiodo, a former Keystone director, is alleged to have spent $6.8m of investor money on personal expenses, according to claims filed by the corporate regulator in the federal court in August. Mr Chiodo denies the ­allegations.

First Guardian investors have been directly exposed to Chiodo Corporation: as recently as May 2021, one of the funds listed on First Guardian’s website was the Chiodo Diversified Property Fund.

The fund is no longer listed as an investment option but First Guardian chief executive James Davidson was unable to confirm whether investors were still ­exposed to the fund. Mr Chiodo stepped down as a Keystone director on May 27, when First Guardian investors were informed of the planned restructure. Further letters sent to investors in the months since have seen the planned reopening date push out further as the fund attempts to justify the delay.

“The recent delays experienced are due to the complex, multi-jurisdictional nature of recent transactions. While awaiting the final release of funds, the counterparties involved are incurring financial penalties, the benefits of which will be passed directly onto investors through a positive impact to unit pricing. Senior management is engaging these institutions daily to expedite the release of funds,” the fund said in October.

The latest correspondence, sent on January 17, provides little comfort to locked-out investors.

“The lifting of withdrawal restrictions over the fund remains contingent upon the receipt of significant contracted cash receivables due.

“To this end we continue to work closely with the respective counterparties to resolve any outstanding matters …”

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Originally published as First Guardian’s suspension leaves its investors in limbo as link to developer emerges