Shield sent almost $65 million to lead generators

ASIC is suing directors and compliance committee members of the Shield Master Fund’s responsible entity, Keystone Asset Management, for misuse of investor money.

The regulator is suing Paul Chiodo, Ilya Frolov, and Mark Yorston, former directors of Keystone Asset Management, for allegedly breaching their director and officer duties. Jeremy Danon and Frolov are named as the former compliance committee members who are alleged to have failed to meet their legal obligations.

ASIC allege in Federal Court documents that in the period from 12 April 2022 to 8 December 2023, Chiodo Corporation made payments totalling almost $65 million to lead generators.

ASIC also alleges that former Keystone Asset Management directors and compliance committee members put hundreds of millions of dollars of Australians’ superannuation at risk by investing scheme funds in related entities and third parties without proper safeguards.

In total more than $530 million in retirement savings from around 5800 investors flowed into the Shield Master Fund.

ASIC alleges around $305 million of those funds were transferred to a related property development fund controlled by Keystone Asset Management, before being transferred to entities linked to Chiodo and Frolov.

The regulator alleges that investor money was used for unauthorised purposes without a sufficient connection to the intended property development projects, including payments to related parties and third parties without the required prior approval of scheme members.

ASIC has also alleged that the funds were transferred without basic safeguards including proper security, valuations, oversight, or management of conflicts; and there was a failure to ensure compliance with the Shield Compliance Plan by failing to obtain valuations of the assets of Shield and manage conflicts of interest involving Chiodo and Frolov.

ASIC is seeking civil penalties and disqualification orders against the former directors. The regulator’s investigations into matters connected to Shield are continuing.

ASIC chair Sarah Court said the case reflects alleged failures in how hundreds of millions of dollars of Australians’ super savings were handled and protected.

“Investors in managed investment schemes are entitled to expect that their investments will be carefully managed on their behalf but, in this case, ASIC alleges investors were exposed to conflicted arrangements and poor oversight,” Court said in a media release.

“We allege hundreds of millions of dollars of superannuation was transferred to related entities without basic safeguards, exposing thousands of Australians to significant financial risk.

“These proceedings are about holding those we allege to be involved to account and sending a clear message that directors operating schemes of this kind must act in investors’ best interests.

Shield is a registered managed fund, registered in May 2021. ASIC halted new offers of investments in Shield in February 2024.

In June 2024, ASIC froze shares in a share trading account connected to Shield which was preserved for the benefit of investors.

In April 2025, the liquidators of Keystone Asset Management determined it was in the best interests of investors for Shield to be terminated.

The liquidators subsequently sold those shares and deposited the proceeds of nearly $200 million in interest-bearing accounts for the benefit of Shield unitholders and have since made an application for the interim distribution to investors.

Liquidators have also commenced proceedings to recover assets for the benefit of investors, including taking action to preserve up to $158 million of additional assets. Those proceedings are ongoing.

Macquarie remediated Shield investors $321 million, returning them to their starting investment position before being rolled into the fund, as part of a court enforceable undertaking with ASIC that included admitting to contravening the Corporations Act by failing to place the Shield Master Fund on a watch list for heightened monitoring. This has been accepted by the court.

Equity Trustees was the only other trustee to onboard Shield and is fighting allegations of wrongdoing in court.

Diversa Trustees, Netwealth and Equity Trustees onboarded the First Guardian Master Fund; only Netwealth has remediated investors.

Diversa and Equity Trustees both have court proceedings against them related to First Guardian and Diversa has applied to the government for a $239 million bailout of First Guardian investors.

ASIC acted against the Shield and First Guardian funds over concerns that investor money was being misused on high-risk investments, pet projects of directors and personal expenses, and court proceedings against both funds are ongoing.

The two funds were managed separately, with liquidators for Shield expecting to recover roughly 70 per cent of the funds, while liquidators for First Guardian have reclaimed only a few million.

Investments in Shield and First Guardian grew due to a sophisticated network of lead generators that contacted people who used online “superannuation health check” advertisements and applied high-pressure sales tactics to refer them to financial advisers.

ASIC has alleged that financial adviser Ferras Merhi received millions in marketing dollars from the funds to help distribute the products.

ASIC has also acted against lead generators, advisers and licensees allegedly responsible for distributing the funds, but has also sought to hold the “gatekeepers” for products – platform trustees and researchers – to account. SQM Research is also fighting allegations of due diligence failures in court.

The regulator has recently expanded a watchlist of lead generators, although inclusion shouldn’t be taken to mean they have contravened the law, only that consumers should “exercise additional caution” when engaging these businesses.