Lawyers closing in on Sydney lender GEMI Capital class action

Lawyers are closing in on a class action case against Sydney financiers GEMI Capital, with investors in the group’s mortgage funds furious amid a freeze on redemptions.

Lawyers are inching towards a class action targeted at Sydney non-bank lender GEMI after allegedly freezing redemptions on its mortgage fund. Photo by: NCA Newswire/ Gaye Gerard

Lawyers are closing in on a class action case against Sydney eastern suburbs financier GEMI Capital, with investors in the group’s mortgage funds furious amid a freeze on redemptions and distributions.

MC Lawyers and Advisors are running the ruler over GEMI which has lent more than $3bn out since its launch.

The financier spruiked a string of loans signed with clients keen for short-term cash solutions.

The funds house, backed by Justin Epstein who has run the group since 2019, touts over $800m in loans in the market “with the majority being repeat borrowers”, with facilities from $1m up to $50m on offer.

The group splits its assets between its cash management fund, the first mortgage fund, and the GEMI Fund, which offers short-term property-backed loans

GEMI is one of the larger private credit providers targeting Sydney’s wealthy eastern suburbs for its funding, alongside rivals such as the Pallas Group.

MC Lawyers managing director Milan Cakic says investors in the group’s mortgage fund were exploring a class action against GEMI after redemptions and dividends were frozen.

“These kind of events are a cornerstone of most investment failures,” he said.

“We’re concerned in due course there will be a corporate failure and an investment failure. When that occurs is anyone’s guess.”

Mr Cakic said the firm was inching towards launching a class action.

He said a number of investors in GEMI had stated their interest in a case, with MC lawyers telling potential members the firm was concerned investors had been “enticed into acquiring GEMI financial products based upon misleading and/or deceptive information from Information Memoranda or their broker/financial adviser”.

GEMI has made a number of forays into the market recently, offering second or first mortgage facilities.

But updates stopped in December, with the firm’s last update noting it had secured a second mortgage across a portfolio of assets in Bunbury and Sydney “to assist with working capital purposes”.

Mr Cakic said he was not privy to all of GEMI’s investments, but “if they’re presently freezing redemptions and not paying interest it’s basically just a proverbial canary in the coal mine”.

“We’re casting a very broad net, we’re looking at GEMI and wrongdoing, we’re looking at directors, valuers, accountants, auditors, as particular targets and areas of interest,” he said.

Mr Cakic said there were questions around the future of GEMI, noting he was hearing rumours the firm was seeking to float its books with other major financial institutions, which could signal the lender was seeking to sell its debts. GEMI claims no funds have been lost since inception across all of its funds.