Ponzi scheme feared as auditor appointed for Melbourne asset manager
A Supreme Court ordered forensic auditor will investigate a Melbourne based asset manager spruiking a return on luxury apartment developments, over the whereabouts of a speculated hundreds of millions of dollars held on behalf of at least some three dozen investors, and fears in recent years of a Ponzi type scheme.
The decision to probe Lion Property Group comes three months since an entity, 125-127 Alexandra Avenue Pty Ltd, was put into administration at the request of over 10 creditors.
Many backers, including mum and dad investors and syndicates, have supported the group since it was formed in 2018 by Garry Pesochinsky and John Sader.
On Monday, Mr Sader disputed the group was running a Ponzi scheme – as claimed by counsel for the investors, Justin Graham, KC – adding Lion will continue to work to complete developments and repay creditors with a view to returning capital.
“Lion denies the allegations made in the proceeding by a small group of investors,” he said.
“Neither Lion, Sader or Pesochinsky are parties to the investor agreements, so the suggestion they breached their obligations is misconceived,” according to the executive.
“Lion does not intend to litigate allegations via the press and will be defending each of the claims made in the proceeding when it files its defence.
“Lion and each of the SPVs have agreed to an independent review of all of their financial records and transactions entered into by group entities by independent accountants, to provide full transparency to investors”.
Lion portfolio
Headquartered in South Melbourne, the company’s website claims it is behind a variety of completed or due-to-be-developed luxury projects including at 122 Beaconsfield Parade, Albert Park – a waterfront block in one of Melbourne’s most exclusive suburbs – with a complex, Elysian.
In Queensland, it controls properties in Brisbane’s Newstead and on the Gold Coast at Mermaid Beach.
Several plots have been sold by mortgage-holders including in Melbourne’s, Brighton, at Hall Street (which traded in May for $3.25m after costing $2.8m in 2020), and 32 Beaconsfield Road, Hawthorn East (selling in April for $4.36m after costing $5m in late 2021).
Another site, a block of apartments in South Yarra’s leafy Adams Street, is also close to sale after being taken over by a first mortgage holder.
Lion paid $8m for this block in April, 2023 – permit ready for four level residential project with seven apartments..
Returns up to 65 per cent (but in earlier years of the business, c12pc) were being promoted for multi-million dollar developments it appears never ran to timelines.
It also claimed directors were paid upfront commissions on each project – more than c$3.5m.
Recently, customers have claimed a lack of communication, some after having distributions unexpectedly halted.
South Yarra entity shut in February
The Alexandra Avenue Pty Ltd entity backed the South Yarra development overlooking the Yarra River.
Investors are believed could be affected to the tune of over $300m. It is unknown what Lion’s real estate portfolio is worth or if it holds other assets.
Customers have taken to social media and, since late last year, a page on information website productreview.com.au, to describe experiences.
Lawyer Peter Richards filed the wind-up applications.
The news comes 19 months since the death of lawyer John Adams who via his Ivanhoe firm, AMS Lawyers, has been revealed as operating a Ponzi scheme potentially leaving investors over $100m out of pocket.
Amongst high profile investors there are Carlton Football Club ex-president, Ian Collins and the Victorian Bookmakers Association.
AFL players and racing figure industries are also understood to be affected.
In New South Wales meanwhile, Melissa Caddick ran a Ponzi scheme affecting dozens of backers to a reported $23m. Some money was recovered including from the sale of jewellery and two dwellings, a mini-manor in Dover Heights, which traded for $9.8m, and an Edgeliffe penthouse.
More to come.
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