ASIC opened formal investigation into First Guardian seven months after it halted Shield investments

Both the Shield and First Guardian funds had significant exposure to failed property developer Paul Chiodo, but one was investigated much earlier than the other.

ASIC opened a formal investigation into First Guardian in September 2024, seven months after it halted investments into Shield Master Fund. Pictured is ASIC deputy chair Sarah Court. Picture: John Feder

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The corporate regulator only commenced a formal investigation into Falcon Capital and its First Guardian funds in September 2024, seven months after it halted investments into the Shield Master Fund, despite both funds having exposure to failed property developer Paul Chiodo.

ASIC put stop orders on Shield in February 2024, three months after commencing a formal investigation into the managed investment scheme (MIS), ensuring no further investor money would be put into the fund.

Within days of the stop orders, SQM Research, the research house that rated both Shield and First Guardian funds, saw the Chiodo connection and put a hold on its First Guardian rating. It downgraded the rating on the $450m First Guardian fund weeks later.

“We downgraded First Guardian before they suspended redemptions and we know of people who got out because of our downgrade before the fund was suspended,” SQM Research managing director Louis Christopher told The Australian.

“I believe (First Guardian) may be the biggest corporate fraud in Australian history so far this century.”

Property developer Paul Chiodo.

As revealed exclusively by The Australian earlier this year, Falcon Capital, First Guardian’s responsible entity, was the trustee of the Chiodo Diversified Property Development Fund until 2021 and First Guardian had a $94m position in one of Mr Chiodo’s property development funds when it collapsed.

Mr Chiodo was a director of the firm that oversaw the $480m Shield, which is now in liquidation. Investor money that went into the fund was allegedly tipped into his property development ventures.

Deals before fund suspended

The regulator may have also seen the link but put no such stop orders on First Guardian funds. Instead it began gathering information, alerting Falcon to the surveillance in March 2024.

Two days later, Falcon executed three transactions worth $188m that would see it shift $95m in loan obligations from related entities over to a third party called Maleo Singapore, ASIC alleges in legal documents sighted by The Australian.

First Guardian’s former CEO David Anderson was a director of Maleo Singapore until the day before these alleged transactions.

Falcon had been owed a combined $95m from two Indonesian-based firms it had invested in but assigned these obligations to Maleo Singapore and in the process, released its security interests over the two loans, the regulator alleges. To date, none of the $188m has been received.

Twelve days after the March notice from ASIC, Falcon arranged to sell the $94m Chiodo property fund holding. It has yet to receive any of the $94m from the buyer.

Weeks later, in late May, First Guardian suspended investor redemptions under the guise of a short-term restructure.

Falcon Capital co-founder Simon Selimaj, developer Paul Chiodo and former First Guardian CEO David Anderson.

It took the regulator a further three months to formally start investigating Falcon and First Guardian, according to legal documents filed by the regulator in court.

Five months later, in February 2025, ASIC finally expanded its investigation to Mr Anderson.

An ASIC spokesman acknowledged the formal investigation into the fund began in September last year but said the regulator had begun its surveillance of Falcon the February prior.

“We understand how distressing the situation is for investors which is why ASIC’s priority in both the Shield and First Guardian matters has been to preserve as much of investors’ funds as possible while our investigation is continuing,” he said.

“ASIC has and is taking extensive enforcement action based on the information available. ASIC however has had to be mindful that early interventions can cause the collapse of otherwise functioning investment funds.”

A lavish Hawthorn home and a $550,000 Lamborghini

In March this year, ASIC sought from the Federal Court orders freezing the assets of Falcon Capital, the First Guardian funds and Mr Anderson. But it only sought similar freezing orders for Falcon co-founder Simon Selimaj this month.

As previously reported by The Australian, ASIC alleges Melbourne-based Mr Anderson used investor money for his personal benefit, including to pay the mortgage on his lavish $9m Hawthorn home. According to the claims by the regulator, $5.6m was allegedly deposited into Mr Anderson’s personal ANZ account between mid 2020 and 2024, “without any legitimate basis for payments in that amount being apparent to ASIC or disclosed to investors”.

A Lamborghini Urus, purchased by Falcon in 2023 for $548,000, was found in Mr Selimaj’s possession in recent weeks. Liquidators for the fund estimate they could get up to $400,000 for the luxury car.

David Anderson purchased his $9m Hawthorn home in December 2020.

The liquidators report released last week provided a grim update to the 6000 investors that have half a billion dollars’ worth of superannuation savings locked into the fund, much of it feared lost.

Investors were initially led to believe the value of their assets was in the region of $500m but the liquidators said the recoverable value of the investments, which includes $242m channelled offshore, was likely “considerably” less.

If any money is recovered, it will be years before it is returned, the liquidators said.

Despite First Guardian purporting to invest client money in defensive, diversified and growing assets across a number of funds, the liquidators said the allocation was arbitrary, with no difference between the different classes or the assets held in each class.

Falcon operated two investor application accounts whereby client money was received and sent to First Guardian Funds, according to the liquidators’ report, and money was sent back to meet redemption requests. In total $642m was received and $197m redeemed, leaving $446m outstanding.

Of the outstanding funds, a total of $69m was invested or loaned to entities associated with Mr Anderson, while the 19 investments across the various First Guardian funds “do not include any direct assets which are real property backed with first-ranking mortgage security”, the liquidators said.

In a further blow, three Australian-based ventures that Falcon put a value of $59m on are already insolvent, according to the report.

ASIC probes advisers, super trustees, research house

Alongside its investigation into the fund managers, ASIC is also probing lead generators and financial advisers who tipped thousands of clients into both Shield and First Guardian.

In some instances, financial advisers allegedly put clients into the Shield and First Guardian funds without their knowledge, according to documents seen by The Australian, listing one set of investments on statements of advice before switching investor money into the two funds which have since collapsed.

The same Venture Egg advisers also allegedly put client money into James Hird’s Euree Asset Management, again, without direct consent and despite statements of advice recommending other investments. Euree is a liquid fund that has outperformed its benchmark since its inception in 2023 and has met all redemption requests. There is no suggestion that Mr Hird had any knowledge of the alleged conduct of Venture Egg.

ASIC also told The Australian it is closing in on taking action against super trustees Macquarie and Equity Trustees for their role in the collapsed managed investment schemes, with its investigations into the two firms to wind up as soon as next month.

ASIC deputy chair Sarah Court said the regulator was looking at its options for holding Macquarie, Equity Trustees and others to account over the failed schemes, into which 12,000 investors tipped about $1bn, most of it over a two-year period.

First Guardian was available to investors on super platforms hosted by Equity Trustees, Netwealth and Diversa, while Shield, also in the process of being wound up, was available on platforms hosted by Macquarie and Equity Trustees.

The regulator is also believed to be probing the role of research house SQM Research, which rated both funds as “favourable”, with a 3.75 per cent rating.

Amid criticism the research was not robust enough, SQM Research’s Mr Christopher pushed back, saying research houses were not auditors.

“We are not auditors. That’s not our job; we rely on auditors to do their job,” he said.

“The rating, at 3.75, wasn’t a high rating. There were risks there, such as the related responsible entity, but those risks were reflected in the rating and the report,” he added.