Jonathan Shapiro and Liam Walsh at Australian Financial Review report that provisional liquidators have been appointed to companies tied to the AUD80 million IPO Wealth Fund, the maiden offering of the embattled Mayfair 101 investment outfit.
Its founder, James Mawhinney, is likely to face questions in coming months about the IPO Wealth companies in a public examination, the Victorian Supreme Court heard on July 2, AFR says.
AFR relates that the appointment was made after the court ruled the move was in the best interests of the 181 investors of the now frozen IPO Wealth Fund.
“The scheme has failed,” the report quotes Justice Ross Robson as saying on July 2.
Mr. Mawhinney, in a statement, said the court outcome was disappointing and he would cooperate with the provisional liquidators.
“We are confident that once all the facts are known, any concerns about how we have operated will be put to bed. We always operate in the best interests of investors and within the guidelines,” AFR quotes Mr. Mawhinney as saying.
That decision quashes attempts by Mr. Mawhinney, 36, to avoid the appointment of provisional liquidators that will now be given additional powers to investigate IPO Wealth activities, according to AFR.
Mr. Mawhinney had late last month appointed a voluntary administrator to IPO Wealth companies and proposed a deed of company arrangement with the aim of recovering the funds for investors, AFR recalls.
As part of the proposal, Mr. Mawhinney pledged security he valued at AUD20 million on a Mayfair 101 property investment in Venetian island Isola San Spirito. He also offered AUD3.2 million in accrued IPO Wealth performance fees held on trust, the report says.
But the fund trustee Vasco, the largest creditor, had said it would not support the deal, which it said offered nothing for investors, AFR relates.
IPO Wealth was set up in March 2017 and was marketed as having “investor protection mechanisms” and being an alternative to term deposits.
According to AFR, investors’ funds were loaned to IPO Wealth companies to invest in ventures from an Indian business software company to a small business lender.
It was part of the broader Mayfair 101 outfit, which skyrocketed to attention last year in a AUD30 million purchase of Dunk Island in Queensland promoted by Instagram influencers and discussed in seminars with retiree investors.
AFR says the outfit also raised AUD130 million through its Mayfair Platinum notes.
But missed payments in February and concerns about the status of investments prompted the fund’s trustee Vasco to have receivers appointed to IPO Wealth companies in May, the report states.
Lawyers for Vasco, the receivers and the Australian Securities and Investment Commission argued that the judge should appoint a provisional liquidator, says AFR.
In reviewing evidence on July 3, Justice Robson said the court had heard allegations the books and records were a “shambles”.
He said questions were also raised about Mr. Mawhinney’s explanations about shares in the Indian software investment being transferred outside of the IPO Wealth group to a British Virgin Islands company that the entrepreneur said was part of the larger Mayfair 101 Group, AFR relates.
According to AFR, Mr. Mawhinney has maintained the transfer benefited investors and rejected allegations the trustee was mislead about the value of the fund.
AFR relates that Mr. Mawhinney’s lawyers argued under a receivership the assets were secured and that the appointment of a liquidator would damage the broader Mayfair 101 outfit.
Justice Robson said he acknowledged the argument but said the damage would already have had occurred with the appointment of receivers, adds AFR.
About Mayfair 101
Mayfair 101 Group is an Australian-based investment company. Mayfair 101 Group on June 22 placed IPO Wealth Holdings Pty Ltd into voluntary administration to protect IPO Wealth Fund investors from the liquidation of the assets held by IPO Wealth Holdings Pty Ltd and its subsidiaries.
The Group has appointed Barry Wight, Daryl Kirk and Rachel Burdett of Cor Cordis as voluntary administrators.
The appointment comes as a result of the decision of the IPO Wealth Fund’s trustee, Vasco Trustees Limited, to appoint receivers to the IPO Wealth Holdings group of companies on May 22, 2020.