Shield Master Fund investor money got Sequoia’s Morrison Securities deal over the line

Shield Master Fund investors unknowingly got Sequoia Financial’s $40.5m sale of Morrison Securities done. They were put into the collapsed Shield by advisers linked to Sequoia through its financial advice subsidiary InterPrac.

Pictured are: James Hird, CEO of Euree Asset Management (top left), Garry Crole, managing director of Interprac and CEO of ASX-listed Sequoia (bottom left), and Venture Egg founder Ferras Merhi (centre).

Shield Master Fund investors unknowingly played a key role in ensuring Sequoia Financial’s $40.5m sale of Morrison Securities succeeded after they were put into the stricken Shield fund by advisers linked to Sequoia through its subsidiary, InterPrac.

The Shield fund’s responsible entity handed $15m to Morrison buyer New Quantum as a loan in mid-2023, three months after New Quantum agreed to buy 80 per cent of the securities business.

This loan was crucial to keeping the Morrison deal alive, coming shortly before the August 31 deadline for the purchaser to make its final $15m payment to ASX-listed Sequoia.

This $15m was Shield investor money, according to sources close to Shield and its responsible entity, Keystone Asset Management.

New Quantum’s US backer, Beaconsfield Capital, put the wealth group into receivership last year when Keystone sought the return of its $15m. Shield liquidators have now written the loan off, meaning it expects nil return.

Sequoia’s links to advisers and funds

Many of Shield’s investors had their superannuation savings put into the fund by InterPrac-authorised representatives of advisers Venture Egg and Reilly Financial. Sequoia is InterPrac’s parent company and Sequoia’s CEO Garry Crole is also the managing director of InterPrac.

The Shield fund, structured as a managed investment scheme, only started taking investor money in early 2022 but by September 2023 it had $446m in super savings. By the time the corporate regulator halted investment into the fund in early 2024, 5800 investors had $480m of retirement savings tied up and impossible to access.

Shield collapsed last year and liquidators are currently working through how much money can be returned to investors who fear their wealth has been lost.

ASIC is investigating whether the fund and its directors misled investors and mismanaged funds.

ASIC is also investigating InterPrac and advice firms Venture Egg and Reilly Financial as part of its broader probe into Shield and another stricken fund, the First Guardian Master Fund.

InterPrac-licensed Venture Egg was run by Ferras Merhi, who is also under investigation by ASIC.

James Hird, Garry Crole and Merhi Ferras, centre.

Mr Merhi ran two advice shops, the aforementioned Venture Egg and Financial Services Group Australia (FSGA). FSGA is now in liquidation, and InterPrac cut ties with Venture Egg in May this year.

Between the two advice firms, Mr Merhi and his teams put more than 6000 of the 12000 affected investors into Shield and First Guardian, The Australian understands.

Both Shield and First Guardian were marketed as diversified portfolios that were delivering higher returns than those available in industry super funds.

Their rapid accumulation of client money was in large part due to lead generators that would cold call prospective investors and use aggressive tactics to link them up with advisers, sometimes in a three-way call.

An investigation by The Australian found that in some cases, Venture Egg financial advisers tipped clients into the Shield and First Guardian funds without their knowledge, listing one set of investments on statements of advice before switching investor money into others. Those other strategies were the two funds First Guardian and Shield, and a third fund, Euree Asset Management, run by former footballer James Hird.

As well as owning InterPrac, ASX-listed Sequoia has a 20 per cent stake in Euree, which counts InterPrac’s Mr Crole as a director and Mr Hird as its managing director. Euree has said it is a top performing fund and all redemption requests were being honoured. The Australian is not suggesting any wrongdoing by Euree.

Venture Egg’s Mr Merhi has previously outlined to The Australian how he operated a negative consent model, meaning if clients didn’t reply to investment change requests they were assumed to give consent.

“Basically, if you’ve emailed and you’ve given a significant amount of time for the client to respond, and then the client doesn’t respond, then consent by acquiescence,” Mr Merhi explained.

The Australian has spoken to a number of advisers who dispute the legitmacy of negative consent.

InterPrac previously told The Australian it ordered advisers to stop putting client superannuation money into Shield and First Guardian in mid-2023 “once unusual volumes were observed”.

But it did not inform ASIC at the time, it said, because “there was no evidence of any inappropriate management of the said funds”. It took the hold off First Guardian in September of that year meaning new capital could be accepted.

The Australian has seen evidence suggesting Venture Egg clients had savings moved into both funds during the lockout period, which came after Sequoia had agreed to sell Morrison to New Quantum, but before the transaction had completed. The Australian is not suggesting InterPrac or Sequoia knew the source of New Quantum’s funds at the time.

As a licensee, Interprac would have clipped the ticket on advice given to clients by Venture Egg and Reilly Financial advisers, typically between 5 and 10 per cent of the client fee.

A spokesman for Sequoia said the firm “takes its corporate responsibilities seriously and does not comment on speculation. The company believes that the questions infer factually incorrect and misleading claims”.

Originally published as Shield Master Fund investor money got Sequoia’s Morrison Securities deal over the line