The liquidator of the Shield Master Fund has knocked back the existence of a proposal by the director of the fund to remediate investors.
Paul Chiodo, a director of Shield responsible entity Keystone Asset Management who is under investigation for his role in the failed fund, publicly proposed a deal with liquidators to return investor capital “before Christmas” pending agreement with ASIC and Alvarez & Marsal, the liquidator and receiver of Keystone.
The regulator denied it had any involvements in any negotiation.
A statement from Alvarez & Marsal joint receiver and manager Jason Tracy said the Chiodo media statement contained “numerous inaccurate and misleading statements” which required correction.
Tracey said that no proposal has been issued by Chiodo or Chiodo Corporation and that there is no mediation scheduled in the proceeding with City Built and Chiodo Corporation.
City Built is operated by Robert Filippini and is the construction company used by Chiodo Corporation in Shield’s property projects.
Chiodo’s proposal that $110 million be released from bank accounts belonging to City Built was dismissed by Tracey who said Chiodo has no power to offer the release of those funds.
“The Keystone Receivers have been informed by City Built that it was unaware and did not authorise the proposal or offer to release the funds,” Tracey said.
Chiodo’s proposal sought to distribute funds to Equity Trustees members, given Macquarie had already agreed to remediate Shield clients on its own platform, but Tracey said the Corporations Act requires Keystone receivers distribute according to unitholders’ rights and that they have no power to do otherwise.
“The Keystone receivers are continuing to take steps to recover assets on behalf of the Shield Master Fund and distribute the proceeds to the unitholders,” Tracey said.
“The Keystone receivers intend to make an interim distribution to unitholders as soon as possible.”
The total distribution to be made is expected to exceed $100 million and Federal Court approval is required before the distribution can be made, Tracey said.
He added that the receivers currently intend to file the court application within the next fortnight and will seek a hearing date as soon as possible.
“Preliminary work was required before the application could be made, including considering proofs of debt lodged by creditors,” Tracey said.
“Notably, Chiodo Corporation has lodged a proof of debt claiming it is owed about $9 million. The proceeding against City Built and Chiodo Corporation is progressing, with mediation likely to take place early next year.”
Tracey noted the defendants had sought to suspend proceedings against City Built and Chiodo Corporation until after any criminal prosecution of Chiodo and Filippini were made, but this was prevented by the Keystone receivers.
Proceedings have also been brought against another Shield director, Ilya Frolov and associated companies, to recover around $16 million.
Tracey said Chiodo does not appear to be contributing any funds of his own in the offer and receivers have identified assets belonging to Chiodo, his wife and related entities that may be recoverable.
“As such, even if the proposal were to be made, the Keystone receivers do not consider the proposal is in the best interests of unitholders as it could lead to a worse return than their current estimates,” Tracey said.
“In any event, it is not capable of being accepted because the Keystone Receivers must distribute proceeds based on the units held by each unitholder, among other reasons. The Keystone receivers also acknowledge the work being undertaken by ASIC to prosecute claims arising from the Shield Master Fund and recover funds including for the benefit of unitholders.”
Responding to the liquidator’s statement, Chiodo warned that avoiding mediation could lead to unitholder funds being tied up for years in court proceedings.
“We were supposed to meet for mediation no later than 31 October,” Chiodo said.
“We can push that out by a month – if all parties agree – but we need the liquidator to focus on returning known funds to the Shield unitholders rather than relying on litigation strategies which could leave the unitholders with nothing.”
ASIC commenced stop orders against Shield, along with the First Guardian Master Fund, due to concerns of mismanagement of investor money.
While a group of advisers are alleged to have been a central part of distribution of both funds, the management of the two funds were handled by different parties, although base allegations for misusing investor money for personal expenses and pet project investments.
