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, ASIC alleges in new Federal Court proceedings.
ASIC is suing Paul Chiodo, Ilya Frolov, and Mark Yorston, former directors of Keystone Asset Management Ltd (Receivers & Managers Appointed) (In Liquidation) (Keystone Asset Management) for allegedly breaching their director and officer duties, and Jeremy Danon and Mr Frolov, former compliance committee members for allegedly failing to meet their obligations.
In total more than $530 million in retirement savings from around 5,800 investors flowed into the Shield Master Fund (Shield). Shield was operated and managed by Keystone Asset Management.
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 Mr Chiodo and Mr Frolov. ASIC further alleges:
- the funds were transferred without basic safeguards including proper security, valuations, oversight, or management of conflicts
- 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, and
- failures to ensure compliance with the Shield Compliance Plan by failing to obtain valuations of the assets of Shield and manage conflicts of interest involving Mr Chiodo and Mr Frolov.
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.
'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,' the Chair said.
ASIC is seeking civil penalties, disqualification orders against the former directors and costs.
ASIC's investigations into the matters connected to Shield are continuing.
