Passport seized and assets frozen: property developer Paul Chiodo and Keystone Asset Management in court

Paul Chiodo has been banned from leaving the country amid an investigation by ASIC into a fund managed by Keystone Asset Management.

The Federal Court has ordered former Keystone director Paul Chiodo be restrained from leaving the country.

Melbourne-based property developer Paul Chiodo will be forced to surrender his passport amid an Australian Securities & Investments Commission investigation into a fund managed by Keystone Asset Management.

The Federal Court also granted Australia’s corporate cop freezing orders over property and bank accounts in Keystone’s Shield Master Fund, it was revealed late on Wednesday.

As well, Justice David O’Callaghan ordered Mr Chiodo be restrained from leaving the country, according to an ASIC statement.

“ASIC sought these orders to ensure Mr Chiodo, as a former director of Keystone, remains in Australia while ASIC continues its investigation,” it read.

Mr Chiodo and representatives from Keystone did not attend the hearing and they have not been able to respond to ASIC’s application. The orders were delivered ex parte.

It comes after ASIC earlier this year launched action against the Shield fund to stop new offers of investments in it.

ASIC claimed it issued the stop orders to protect retail investors from buying products under product disclosure statements that might be “defective”.

Among the corporate watchdog’s concerns was that the fund might not have adequately disclosed “the conflicts of interest associated with investments in funds related to Keystone or how Keystone managed those conflicts”.

Responding to the ASIC action, a note relating to the Shield fund was sent to Keystone members in April. It said advisers were appointed to investigate potential conflicts of interest between Mr Chiodo – who was also a Keystone director – and entities linked with him.

“The board has also engaged top tier legal, accounting and corporate advisers to review the underlying arrangements of the Fund, its governance and its investments, including as they concern conflict management and related party arrangements with Chiodo Corporation Pty Ltd and other entities related to Paul Chiodo,” the note read.

“This work is expected to be finalised in the coming weeks.”

As part of the interim stop order process, ASIC identified “concerns in relation to the Fund’s product disclosure statements”, the Keystone update read. “It goes without saying that the board has been at pains to work cooperatively with ASIC.”

The note addressing the potential conflict of interest was signed by Mr Chiodo. A Shield fund product disclosure statement published in November last year said: “Paul has managed and developed over $1 billion worth of property within Victoria.”

ASIC’s latest enforcement action against Keystone was taken to “help protect investor funds while an investigation is continuing”, the watchdog said.

As well as orders that Mr Chiodo surrender his passport, Shield’s assets were frozen.

Justice O’Callaghan ordered Keystone be restrained from removing property from Australia and selling, charging, mortgaging, dealing with or disposing of property.

As well, Keystone must not incur new liabilities or withdraw, transfer, dispose of or deal with money held in bank accounts or with a financial institution.

A further court hearing is listed to take place next Tuesday.