Developer lauds rescue deal that could negate ‘slanderous’ ASIC misconduct probe

Embattled property developer Paul Chiodo’s collapsed funds management business could be rebirthed via a rescue deal, despite the risk that such a move could effectively end the administration sparked by the corporate watchdog’s probe into allegations of misconduct.

Chiodo, who is a significant creditor to Keystone Asset Management, told this masthead he supported any proposal – in this case, a deed of company arrangement (DOCA) – that would steer the business away from liquidation.

A rendering of Chiodo Corporation’s proposed resort on K’Gari (Fraser Island) that was included as an investment in a property fund tied to the Shield Master Fund. There is currently no planning application for the resort. Credit: Instagram

There are doubts, however, about whether the move will win the backing of the Australian Securities and Investments Commission.

“I completely support, and will continue to vigorously fight for, a DOCA. We all know that this is the best outcome for our 5000 members, who want to see this resolved,” Chiodo said.

“We just need a clean path to present a DOCA without destructive hurdles from [the administrators] Deloitte and ASIC,” he said.

Over just a few years, Chiodo Corporation rose from a small-time suburban developer to planning a $1 billion-plus portfolio of high-end resort development projects in Venice, Port Douglas, K’Gari (Fraser Island) and Fiji.

Paul Chiodo says he supports any proposal to steer Keystone away from liquidation.

But an investigation by this masthead revealed many of the projects were beset with problems or did not have planning approval.

Chiodo also ran a successful Melbourne-based funds management empire through Keystone and other entities. Both Chiodo and Keystone are now the subject of an ASIC probe.

Keystone was the responsible entity for the Shield Master Fund, which raised $500 million over three years from thousands of investors, mainly from Victoria, NSW and Queensland.

ASIC won Federal Court orders installing Deloitte as administrators over concerns that investors’ funds put into the Shield Master Fund were allegedly improperly used to fund Chiodo’s development empire.

Special situations group Arbitrium Capital Partners has confirmed to this masthead that it is assessing whether to make a DOCA proposal for Keystone.

A DOCA is a deal that seeks to offer creditors to a collapsed company a cents-in-the-dollar deal to acquire and restart the business.

It is unclear what shape the DOCA would take or whether Keystone could be rebirthed given the extent of the allegations against it as the responsible entity for the Shield Master Fund.

ASIC has alleged in court it has “grave concerns” about Chiodo and Keystone’s business decisions.

Those concerns include that there is allegedly a shortfall between the sum invested and the value of the assets owned by the fund; that Chiodo used funds for personal use; that he hired a builder on an “oral agreement”; and that payments were made for celebrity appearances at events by sports stars, including basketballers Allen Iverson and Josh Giddey and boxers Tyson Fury and Floyd Mayweather Jr.

The watchdog declined to comment on whether it supported the prospect of a deal or if it would limit its investigations into the group.

Two sources aware of ASIC’s thinking – who declined to be named because of the ongoing legal matters – said the regulator would be cautious when assessing any deal.

The Deloitte partners overseeing the group’s affairs, Lucica Palaghia and Jason Tracy, have previously recommended to the court that they be appointed liquidators – a move that would give them deeper investigative powers into alleged breaches by Keystone and its associates.

A spokesman for Chiodo hit out at the ASIC allegations, saying Keystone’s management of the fund was consistent with documentation and there were “no missing millions”.

“No fund monies have been applied to personal uses. The said apartment purchase was made with private funds earned by Paul as owner of Chiodo Corporation, which in turn earned development management fees,” the spokesman said.

“Unproven, untested and slanderous allegations to the contrary have been made in Federal Court to secure media coverage without risk of defamation.

“A shortfall in valuation, calculated under duress in a dire construction market, does not represent misuse or malfeasance.”

A rendering of the Fiji resort being planned by Chiodo Corporation.Credit: Instagram

The spokesman said the group’s various projects were progressing at different stages “as is industry norm”, and that events featuring celebrity sportspeople formed part of “a broader database build for the hotel management company that will oversee the Chiodo resort collection”, and that the builder’s invoices were all in order.

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