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ASIC acts against unregistered offshore fund operators targeting Australian investors and self managed superannuation funds
10-74MR ASICacts against unregistered offshore fund operators targeting Australian investors and self managed superannuation funds
Thursday 8 April 2010
ASIC has taken action in the Supreme Court of New South Wales against the unlicensed operators of 14 unregistered offshore managed investment funds operating in Australia. ASIC claims the operators of these funds, including, principally, Mr David Hobbs, of Nelson, New Zealand and the former Vanuatu company, Future Trading Corporation Ltd., none of whom held an Australian Financial Services licence, targeted Australian investors and self managed superannuation funds.
In the course of its investigation ASIC has had assistance and collaboration from the United States’ Commodity Futures Trading Commission, the New Zealand Securities Commission and the Securities and Futures Commission of Hong Kong.
Nineteen defendants are named in the proceedings. However, ASIC alleges Mr Hobbs controlled the operation of all 14 funds, and while marketed as separate funds they in fact comprised one scheme. The funds are:
Integrity Plus Unit Trust operated by P.J.C.B. International Ltd;
Super Save Superannuation Trust operated by 888 Management Inc (Turks & Caicos Islands), Idylic Solutions Ltd and Idylic Solutions Pty Ltd;
Master Fund and First Secured Bond Unit Trust operated by Secured Bond Ltd;
Enhanced Fund operated by Barclaywest Ltd;
Pinnacle Fund and Super Save operated by 888 Management Inc;
Covered Strategies operated by Ultimate Investments Ltd;
Prestige Unit Trust and Smart Money operated by Geneva Financial Ltd;
Elite Premier and Elite Premier Option 2 operated by Preserved Investment Group Ltd;
The Good Value Fund operated by North Wave Ltd; and
The Best Fund operated by GP Global Ltd.
Since 2002, more than 700 Australians have invested in excess of US$42 million in the funds. Two of the funds, the Super Save Superannuation Fund and Super Save, specifically targeted investors for their superannuation money. ASIC asserts the scheme operators used off-shore companies, and required investors to set up their own off-shore companies, in countries such as the British Virgin Islands, Anguilla and Vanuatu so as to conceal the true nature of their operations and to circumvent Australia’s financial services laws.
ASIC claims most of the investors and self managed superannuation funds were promised access to offshore investment opportunities and/or the wholesale financial market generating returns in the order of 3– 4 per cent or more per month and that there was no risk of losing the invested money; it is also alleged other investors were attracted into the funds by promises of a stake in offshore investment companies involved in project investment, principally in China.
It is ASIC’s case that in fact, investors’ funds were dispersed to various off-shore accounts including in New Zealand, Hong Kong, and the US and some were also used, as in a ponzi scheme, to pay monthly returns to other investors. Only a portion of investors’ funds were actually invested and, contrary to the promises made, these funds were used to engage in high risk commodities, futures and options trading in the US.
ASIC alleges Mr Hobbs operated the scheme together with the following individuals and offshore companies:
Jacqueline Hobbs 48, of Nelson, New Zealand;
Min Hua (Lilly) Li 47, of Lugarno, NSW;
David Collard 63, of Peakhurst, NSW;
Brian Wood 67, of Concord, NSW;
Jimmy Truong 34, of St John’s Park, NSW;
Con Koutsoukos 41, of Wiley Park, NSW;
Hui Min (Nancy) Wu 54, of Artamon, NSW;
Idylic Solutions Pty Limited, Burwood, NSW; and
10 international companies incorporated in various countries including Vanuatu, the British Virgin Islands and Turks and Caicos Islands.
ASIC alleges numerous breaches of the corporations legislation including that:
each of the individual defendants misled potential and existing investors and carried on a financial services business without the required Australian financial services licence;
Mr Hobbs, Mr Wood, Mr Truong and Mr Koutsoukos illegally operated unregistered managed investment schemes; and
Mr Hobbs, Ms Li, Mr Collard, Mr Wood, Mr Truong and Mr Koutsoukos breached their duties as directors of the companies operating the funds, including by failing to act in the best interests of the companies and for a proper purpose and improperly using their positions to gain an advantage for themselves or someone else.
ASIC is seeking court orders disqualifying Mr Hobbs, Mrs Hobbs, Ms Li, Mr Collard, Mr Wood, Mr Truong and Mr Koutsoukos from managing corporations and operating managed investment funds and that each of Mr Hobbs, Mrs Hobbs, Ms Li and Mr Collard pay a pecuniary penalty.
ASIC has also asked that the funds/scheme be prevented from targeting Australian investors and self managed superannuation funds and that a liquidator be appointed to wind up the funds/scheme and distribute the investors’ money recovered by ASIC and currently held by the Court.
ASIC reminds investors to take steps to ensure any financial advice they receive is from a person or entity with an Australian financial services licence.
ASIC’s action is next in Court on 11 June 2010.
In 2007 and 2008 ASIC froze eight offshore trading accounts containing investors’ funds and ultimately secured the payment into Court of AUD $20million.
On ASIC’s application, Mr Barry Taylor was appointed as liquidator of the two largest funds; the Integrity Plus Unit Trust and the Super Save Superannuation Fund in June 2008 (refer MR 08-129). AUD$17million has been paid to Mr Taylor for return to investors in those funds and Mr Taylor has already made interim distributions to those investors.
On 15 September 2008 ASIC obtained interim injunctive orders in relation to the scheme known as ‘Secured Bond Master Fund’. These orders secured approximately US$1million held in offshore bank and securities trading accounts. These funds are still held by the Court (refer AD08-10 and AD 08-40).
ASIC has a number of injunctive proceedings on foot which restrict the overseas travel of some of the defendants and preserve assets for the benefit of any subsequent actions.
Editor's note 1: On 7 February 2012, this matter was allocated an eight week hearing in the NSW Supreme Court, commencing 20 June 2012.
In May 2012, ASIC discontinued this civil action against Mr Wood, Mr Truong and Mr Koutsoukos. Each of those individuals has subsequently been charged with criminal offences in connection with the operation of the Integrity Plus fund (see 12-120MR).
Editor's note 2: The trial commenced on 4 July 2012 before Her Honour Justice Ward in the Supreme Court of NSW and concluded on 12 September 2012. Judgment has been reserved.