$1bn tied up in Shield, First Guardian funds

The corporate regulator will seek to wind up a second fund after Melbourne property developer Paul Chiodo was raided by authorities.

Melbourne-based property developer Paul Chiodo is under investigation for allegedly misusing investor funds. He denies the allegations.

The corporate regulator is seeking to wind up a second fund with links to Melbourne property developer Paul Chiodo, with $500m in investor assets linked to the First Guardian Master Fund at risk.

Hundreds of millions of dollars were pumped into the First Guardian Master Fund before its suspension in May 2024, with flows ramping up through 2022. By December 2023, First Guardian’s assets hit $470m, sources told The Australian. This is just shy of the $480m pumped into the Shield Master Fund, now in liquidation.

All up, just under $1bn of investor money — much of it superannuation savings — was allocated to both Shield and First Guardian, including from investors whose advisers tipped them into both funds despite an overlap in their exposure to property developer Chiodo Corporation.

Shield’s funds were invested in the Advantage Diversified Property Fund, which made loans to various companies associated with Mr Chiodo to fund property development projects in Fiji, Italy, Port Douglas and Melbourne, according to the regulator.

Falcon Capital, First Guardian’s responsible entity, was the trustee of the Chiodo Diversified Property Development Fund until June 2021 and First Guardian funds were invested in the property development fund until March 2024, when Falcon entered into an agreement to sell its position. This sale has yet to complete, with no monies transferred, according to the investment firm.

ASIC on Monday applied to the Federal Court for liquidators to be appointed to Falcon and for First Guardian to be wound up.

ASIC is also seeking the appointment of a receiver and manager to the personal property of one of Falcon’s directors, David Anderson.

ASIC alleges $274m of First Guardian’s value arises from cash receivables that are “many months late” and that more than $23m of First Guardian’s assets were paid to entities “purportedly providing marketing services which appears contrary to representations made to investors”.

The regulator also alleges First Guardian invested in entities director and co-founder Mr Anderson had an association with or financial interest in.

Investors may have been misled about the security of their investment and likely returns, according to ASIC.

Federal police and the corporate regulator last week raided the home and business of Mr Chiodo as part of an investigation into the alleged mismanagement of investor money.

As revealed by The Australian this month, Venture Egg advisers recommended First Guardian to 3600 clients between 2021 and 2024, with these advisers alone accounting for $192m of investments. More than 1100 of these investors were also directed into the Shield Master Fund by the same adviser.

The Australian Securities and Investments Commission is investigating the role of financial advisers and lead generators for their part in allegedly encouraging investors to put their savings in high-risk assets, including property developments.

The regulator this month said it was probing Melbourne-based financial adviser Ferras Merhi of Venture Egg Financial Services and Osama Saad, former director of Aus Super Compare, “in connection with its investigations concerning certain managed investment schemes including the Shield Master Fund”.

Mr Mehri, whose firm is an authorised representative of InterPrac, has told The Australian the failures lay with the platforms and trustees.

First Guardian suspended redemptions from its fund last May, telling investors it would be a short-term halt to allow for a restructure.

At the same time it announced a new CEO, James Davidson, with former CEO and co-founder David Anderson to stay on as portfolio manager. The Federal Court has since frozen the assets of Falcon Capital and Mr Anderson.

In an update to investors last week, Falcon said it was working with advisers “to develop a plan to implement an orderly wind down of the fund, so as to maximise the return to unitholders”.

Separately, on Monday the Federal Court heard Melbourne businessman Rashid Alshakshir, who ASIC is investigating as part of its probe into Shield, is “supporting himself through unsecured personal loans”, with some from friends.

During the brief hearing, it was agreed if Mr Alshakshir obtained further unsecured personal loans, he must disclose their details.

ASIC is investigating whether an entity linked with Mr Alshakshir unlawfully received more than $35m and if there “might” be a need for some or all of the money to be repaid to the failed investment fund from where it came, Federal Court judge John Snaden said in a judgement delivered in January.

Justice Snaden said ASIC has “examined” Mr Alshakshir in connection with their investigation into Shield.

“The investigation is complex and ongoing, and ASIC intends imminently to require Mr Alshakshir for further compulsory examination. Given his apparent role in the entities that are the subject of inquiry (or some of them), Mr Alshakshir’s significance to ASIC’s investigation is undoubted,” he said in the judgement.