Details of the proceedings that led to Mayfair 101 entity IPO Wealth being liquidated have been spilled by the trustee, with a review containing concerns the company’s proposed plan against the wind-up would have cost investors.
The Supreme Court of Victoria ordered that IPO Wealth Holdings and each of its subsidiaries be wound up last week.
As outlined in a recent letter to investors from Vasco Trustees, the trustee of the IPO Wealth Fund, Justice Ross Robson had concluded he was satisfied the court-appointed contradictors, who reviewed the options, “came to the right conclusion” when they recommended the companies were wound up.
Mayfair 101 managing director and founder James Mawhinney had made an alternative proposal for why the group should not be wound up, which was then examined by contradictors Stewart Maiden QC and Fiona Hudgson.
The Vasco letter stated that during the course of the hearing, Mr Mawhinney made amendments to the Mayfair proposal to address criticisms being raised by the judge and the contradictors.
But, Mr Maiden argued the proposal would see a mere $1.05 million would remain for distribution among investors, out of the initial $2.3 million capital protection reserves, after $1.25 million was paid to related companies, including $500,000 to IPO Wealth Pty Ltd and $750,000 to new entity Newco.
The contradictor thus concluded Mr Mawhinney and his entities were not proposing to contribute any funds, rather, the proposal would cost the fund’s unitholders.
Any asset realisations would have also supposedly been subject to a significant dilution in order to pay the investment managers 10-15 per cent commissions, it also found.
Mr Maiden added the Mayfair proposal would not deliver the benefit of any liquidators’ investigations or litigation to recover transactions or actions against Mr Mawhinney for breaches of duties.
Mayfair had promised shares in software company Accloud would be contributed under its proposal, but Mr Maiden noted it was impossible to place a value of the holdings, which were not publicly traded.
“…There is no evidence of any tangible business being carried on by Accloud, and the draft valuation provided by Mr Mawhinney was unreliable as to its method and factual basis,” the Vasco letter stated while summarising the contradictor’s findings.
“Without drawing adverse inferences based on undecided matters, the contradictors also noted the adjunct challenges of ‘Mr Mawhinney and several of his companies [being] the subject of regulatory proceedings and investigations, which include the potential of criminal proceedings being brought against Mr Mawhinney.’”
The termination date for the IPO Wealth Fund, as decided by Vasco, is set for 23 December. The liquidation process is expected to take three years or more.
Vasco has signalled it is intending to send unitholders further updates on a quarterly basis. The next update, which will outline the December quarter, is scheduled for January next year.
Meanwhile Mayfair is facing other proceedings around its entities. ASIC recently obtained interim orders restraining the Mayfair 101 Group and Mr Mawhinney from receiving or soliciting funds in connection with any financial product, advertising or promoting any product, or removing from Australia any assets acquired with funds received in connection with any financial product.
The Federal Court has appointed provisional liquidators to Mayfair company M101 Nominees, pending an application from the regulator for its winding up.
ASIC alleged M101 Nominees had raised around $67 million from investors through its fixed-income notes, based on representations there would be full security for their investments – but the funds were said to be not secured and investors were potentially unable to recover their full investments.
A report containing the preliminary findings of the provisional liquidators was released on Thursday, which warned in a winding up scenario, M Core noteholders would not receive a dividend from the company.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].