Private investment fund Keystone appointed administrator despite ASIC court win for a receiver

The tussle over private investment fund Keystone and a former director’s spending habits has taken a twist after it emerged an ASIC court win appears to have been trumped by the company.

Paul Chiodo is alleged to have spent $6.8m of investor money on personal expenses and celebrity boxer appearances.

A large private investment fund which is under heat from Australia’s corporate cop, appears to have undermined the regulator and Federal Court by appointing voluntary administrators to its company after receivers were already locked in.

Less than two days after Keystone Asset Management lost its fight against the Australian Securities and Investments Commission – which had successfully argued receivers be appointed to control the company amid “grave concerns” for hundreds of millions of dollars of investor money – lawyers filed back into the Federal Court in Melbourne on Friday on news Keystone has appointed KordaMentha to administer the company.

That came after lawyers for ASIC revealed allegations that Melbourne property developer Paul Chiodo, who is linked with Keystone and is a former director of the company, spent $6.8m of investor money on personal expenses, and hundreds of thousands of dollars on celebrity boxer appearances.
Barrister Michael Rush, KC, acting for ASIC at the brief hearing on Friday afternoon, said Keystone directors determined the company was insolvent or likely to become insolvent and resolved to appoint voluntary administrators after 4pm on Wednesday.

“As it turned out, unbeknown to us and to the court, there were activities going on for the appointment of voluntary administrators the next day which (have a similar effect) of receivers,” he said.

“There is a risk of duplicative work, costs, that may come out of funds for investors and questions about who has control of property.”

ASIC will seek the removal of voluntary administrators, he told the court.

Keystone was given until 4pm on Wednesday to appeal against the appointment of Deloitte managers Jason Tracy and Lucica Palaghia.

Meanwhile, two new parties attended the court; with a barrister representing investors from financial advisory firm Venture Egg and a barrister on behalf of Keystone directors.

ASIC has launched an investigation into Keystone and its Shield Master Fund, and froze its assets over concern about “the management and operation of Shield and the associated risks to investors”.

Federal Court judge Mark Moshinsky will conduct a hearing into the matter on Thursday.