Australia’s financial watchdog is suing the former directors of Shield Master Fund after its collapse resulted in thousands of investors losing their retirement savings.
It marks the most drastic action taken by the Australian Securities and Investments Commission (ASIC) since nearly 6000 people had their superannuation funds frozen or drained in the 2024 super wipeout.
Thousands of Australians lost $530 million in retirement savings following the collapse. Louie Douvis
ASIC alleges former Keystone Asset Management directors Paul Chiodo, Ilya Frolov and Mark Yorston and compliance committee member Jeremy Danon put millions in superannuation at risk by “investing scheme funds in related entities and third parties without proper safeguards”.
Over $530 million in retirement savings from 5800 people which flowed into Keystone-managed Shield Master Fund was lost in the failed scheme.
ASIC alleges around $305 million was transferred to a property development fund controlled by Keystone Asset Management, before it being transferred to entities linked to Chiodo and Frolov.
The watchdog has accused the fund of multiple failures to ensure compliance and manage conflicts of interest.
It will also allege in Federal Court that investor money was used for “unauthorised purposes” without a sufficient connection to the intended property development projects.
ASIC Chair Sarah Court said investors should expect their funds to be “carefully managed” but instead millions of dollars were transferred without basic safeguards.
“In this case, ASIC alleges investors were exposed to conflicted arrangements and poor oversight,” Court said.
“‘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.”
ASIC Chair Sarah Court (pictured) said investors should expect their funds to be “carefully managed”. Alex Ellinghausen
It will seek civil penalties, disqualification orders against the former directors and costs.
The action taken on Friday comes as a wave of “renewed hope” to investors who lost everything in the fund collapse.
“Every person who played a role in what happened needs to be held accountable,” investor and advocate Melinda Kee told nine.com.au.
“Although this action won’t immediately return peoples retirement savings, every action ASIC takes helps uncover the truth, identifies where investors’ money went, and it increases the opportunity to recover funds.
“Victims have waited far too long for the truth, and the action today gives people renewed hope that justice continues to move in the right direction.”
ASIC has been undertaking action against Shield and First Guardian Master Fund, which collapsed in similarly catastrophic circumstances and resulted in another 6000 people losing money.
This is the first time the watchdog has launched legal action directly against the directors of the failed funds.
ASIC will seek civil penalties, disqualification orders against the former directors and costs. Darrian Traynor
Macquarie Investment Management Ltd oversaw about $321 million in super investments into Shield by about 3000 of its members between 2022 and 2023.
In September, Macquarie was undertaken to repay members 100 per cent of the amounts they invested in Shield less any amounts withdrawn.
ASX-listed financial firm Netwealth alsol agreed to repay a total of $100 million to some victims of the First Guardian collapse.
Netwealth struck a deal with ASIC to refund 100 per cent of the amount, less any money withdrawn, that was invested in First Guardian to 1000 of its members.