An application from the Australian Securities Investment Commission (ASIC) to the Federal Court has been successful, resulting in the order that Mayfair 101 Nominees be wound up.
It is the final outcome arising from ASIC's court actions against Mayfair 101 Group companies and their director James Mawhinney.
The action arose after M101 Nominees raised approximately $67 million from investors during 2019 and 2020 based on representations that funds from investors would be fully secured, when they were not.
M101 Nominees stopped repaying funds to investors in March 2020 and froze interest payments to investors from June 2020.
As such, the Federal Court ordered that M101 Nominees be wound up on just and equitable grounds, and appointed Said Jahani and Philip Campbell-Wilson of Grant Thornton as liquidators.
The pair were previously appointed as provisional liquidators in order to preserve the assets of the company pending the determination of ASIC's winding up application.
In September 2020 the provisional liquidators concluded that M101 Nominees had been insolvent since it began in October 2019.
Further, they found the business model of M101 Nominees was unsustainable because it was raising funds on a short-term basis and on-lending to a related entity, Eleuthera Group, for a term of 10 years.
On this basis the provisional liquidators concluded M101 Nominees would not have adequate funds to repay noteholders as their investments fell due.
In addition, they found the security provided to the Security Trustee on behalf of the M Core noteholders held little value as it excludes real estate assets the only tangible assets held by the Mayfair 101 Group.
Most notably, the group holds assets on Mission Beach's Dunk Island which it planned to rejuvinate following an acquisition in 2019.
The defendants have consented to the orders, and Mayfair 101 now owes approximately $211 million to those who invested in its various products, including the M Core Fixed Income Notes, M+ Fixed Income Notes, the IPO Wealth Fund, IPO Capital and Australian Property Bonds.
"ASIC moved decisively early last year, directly and then ultimately through the courts, to restrain Mayfair from promoting these allegedly misleading products and to protect not only potential new investors but also the interests of existing investors," ASIC acting chair Karen Chester said.
"This action is one of several we have underway (under our project True to Label) targeting fund managers not doing the right thing by investors.
"Especially those fund managers preying on unsophisticated investors, such as older Australians and retirees in regional Australia."
ASIC is also seeking orders that Mawhinney be permanently restrained from certain activities, including advertising any financial product and soliciting funds in connection with any financial product.
That matter will be heard by the court on 15 February 2021.
In December last year another Mayfair 101 company IPO Wealth Fund was hit with a class action by Slater and Gordon (ASX: SGH) 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.
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