The liquidators of the First Guardian Master Fund believe it will be 18 months before distributions are made to creditors or unitholders with only $1.6 million recovered so far.
An updated report on the liquidation released on Wednesday morning by FTI Consulting said whether unitholders are elevated to the status of creditors or not will be immaterial, as creditor claims total only $243,391.
However, the liquidation will cost $1.95 million, with the liquidator given priority over creditors, and unitholders in third place.
The report said $450,000 was recovered from Fox Friday Brewing, one of the alleged pet projects of director David Anderson that had a book value of $28 million; $859,227 from Kanun Capital (book value of $33 million) and $336,646 from the sale of the infamous Lamborghini Urus owned by director Simon Selimaj and purchased for $548,000.
The liquidators hope to know more about some of the other assets in the next six months, but with some of the assets held overseas they anticipate it may take another two or three years for the liquidation to be concluded.
The liquidator’s tracing analysis determined that $468.6 million was received from the fund by 102 different parties, with these transactions and investments broken into four categories: six management related-party investments worth $166.2 million; five related-party investments worth $94.2 million; 11 direct entity/related party investments worth $11.7 million; and 79 third-party investments worth $196.4 million.
Most of the management related-party investments had no formal agreement with First Guardian’s responsible entity.
The director and related parties include personal family members and other entities that are considered “personal investment vehicles” of the directors and not an investment in the fund.
First Guardian investors had been expected to recover less than their peers in the Shield Master Fund, due to much of the funds being moved offshore and therefore harder to reclaim.
Macquarie, which hosted only Shield, agreed with ASIC to remediate clients to their initial position before being rolled over into the fund.
Instead, the iconic Australian wealth giant will recoup what it can post-liquidation – estimated to be 70 cents on the dollar – with the rest being absorbed onto its balance sheet.
NQ Super and Dash’s Super Simplifier – which both have Equity Trustees as trustee – are the other platforms that hosted Shield.
Equity Trustees declined to make any agreement similar to Macquarie’s with ASIC, instead electing to fight in court the regualtor’s allegations that it failed its obligations as a trustee. It is also expected to apply for government assistance to remediate investors.
A letter to Shield unitholders, which has been publicly posted by liquidators Alvarez & Marshal, said they will be lodging a request with the Federal Court on 11 December to approve an early payout to some Shield investors, based on assets that can be sold.
Only four of five sub-classes of Shield will be included, with the Advantage Diversified Property Fund (ADPC) being the exception.
“We consider that the structure of the investment classes within [Shield], and the legal arrangements governing the rights of unitholders in each class, do not permit any alternative to this outcome,” the letter said.
“We are working to recover other property for distribution to unitholders in the ADPC, but the timing of a future distribution to the ADPC class (if any) is unknown.”
ASIC won stop orders against the Shield and First Guardian funds due to concerns about mismanagement of investor money, including the funding of pet investment projects of the directors or personal expenses including luxury cars and mansions.
Both funds are alleged to have paid advice firms who in turn used that money to pay for lead generation services to funnel customers into the funds without considering their best interests.
ASIC alleged financial adviser Ferras Merhi signed 6000 Statements of Advice that directed clients into the Shield or First Guardian products in three-year span and failed to act in the best interests of clients, gave conflicted advice, and provided defective SOAs.
Merhi is also accused of receiving loans from the First Guardian fund to purchase one his advice businesses that far exceeded the purchase price, as well as $19 million from First Guardian to help market the fund.
