Slater and Gordon (ASX: SGH) has launched a class action against collapsed investment fund IPO Wealth Fund over allegedly misleading marketing.
The firm alleges IPO Wealth Fund pitched itself to consumers as a "term deposit alternative" when it was instead a "risky, liquid and speculative investment".
The Federal Court proceedings have been brought against the Trustee of the fund, Vasco Investment Managers, and DH Flinders, the Australian financial services licensee responsible for the conduct of its authorised representative IPO Wealth.
According to Slater and Gordon some $86 million in funds were raised from investors between April 2017 and March 2020.
The firm anticipates a substantial amount will not be able to be recouped by the liquidators.
"The Fund was directly marketed to members of the public as similar to a term deposit," Slater and Gordon practice group leader Emma Pelka-Caven said.
"The Fund's marketing and information memoranda represented that unit holders were investing in a product with limited risks and where the targeted rates of return were readily achievable.
"Instead, unitholders were sold a risky, illiquid and speculative investment."
Pelka-Caven said some of the group members' stories were "gut-wrenching".
"Some of our group members have lost everything they have," she said.
IPO Wealth Holdings was placed into voluntary administration back in June, with the decision made to protect IPO Wealth Fund investors from the liquidation of the assets held by the parent and its subsidiaries.
It followed the appointment of receivers to IPO Wealth in May by Vasco Trustees after two repayments were missed. As reported by the AFR these missed repayments were worth $3 million.
In September the Australian Securities and Investment Commission (ASIC) obtained interim orders from the Federal Court against companies in the Mayfair 101 group (the parent of the IPO Wealth Fund) and director James Mawhinney.
The orders included the appointment of provisional liquidators to M101 Nominees, the issuer of M Core Fixed Income Notes which Mayfair 101 was restricted from promoting back in April.
Mayfair 101 was the group behind a $1.6 billion redevelopment of Dunk Island in Far North Queensland.
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