ASIC’s ‘grave concerns’ over use of investor funds amid sports star payment claims

Property developer and sports fan Paul Chiodo has lost control of his $300 million funds management business amid “grave concerns” about the use of investors’ money, including alleged payments of nearly $700,000 to famous basketball players and boxers.

The decision by Federal Court judge Mark Moshinsky will in effect close the Shield Master Fund, one of Australia’s largest private investment funds with more than 15,000 investors. The fund was overseen and managed by Chiodo’s Keystone Asset Management and CF Capital businesses.

On Tuesday, Moshinsky agreed to appoint a receiver to Keystone Asset Manager after hearing concerns from the Australian Securities and Investments Commission (ASIC) that investors’ money that was supposed to be used for investments in shares and other investments was used for personal expenses and on legal fees and promotions of projects that had no development approval. The judge then stayed the orders appointing receivers until 4pm on Wednesday.

Paul Chiodo.

Following the hearing, Chiodo described the move as throwing investors like lambs to the slaughter.

“Receivership is the worst of all outcomes for members,” he said.

“Receivership leads members down a dangerous path like lambs to the slaughter.”

Earlier in the day lawyers for ASIC told the court that its concerns included the payment of $154 million of investors’ funds to an unlicensed builder retained by Chiodo for his private company’s projects under an “oral agreement”.

The court also heard investors’ money was used to pay $700,000 in corporate event appearance fees to big-name NBA players Allen Iverson and Josh Giddey, and boxers Tyson Fury and Floyd Mayweather Jr. A further $6.8 million of investors’ funds was paid to Chiodo for personal reasons, the court heard.

Lawyers for ASIC told the court the regulator had been investigating Chiodo since November amid concerns a large amount of investors’ money was improperly invested in private property development projects for Chiodo Corporation. An investigation by this masthead earlier this month revealed that many of Chiodo’s development projects that had been used to sap investors’ funds were facing significant delays and did not have development approval.

Lawyers for ASIC told the court the appointment of independent receivers was necessary to safeguard investors’ funds.

Michael Rush, KC, told the court: “The commission holds grave concerns about the conduct of Keystone and certain of its officers and related entities arising from these four matters.

“Firstly, the remaining value of the assets in the fund. Secondly, the shortfall between the amount of investor subscriptions and funds current value. Thirdly, the uses to which investor funds have been employed. And fourthly, the first defendant’s [Keystone] failure to perform the most basic duties necessary to protect investors.”

ASIC’s investigation into Keystone and Chiodo continues. Chiodo has long denied any wrongdoing and is defending the matter.

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