Australian Federal Court shuts Avestra schemes linked to 1MDB crisis
The Federal Court has ordered the shutdown of five investment schemes run by Avestra Asset Management, a Gold Coast financial services group drawn into Malaysia’s 1MDB crisis.
Judge Jonathan Beach made the orders after reading a report from provisional liquidators that found undisclosed related-party transactions, 13 potential breaches of corporate law and failure to invest according to the fund’s individual mandates.
The report, compiled by Simon Wallace-Smith and Richard Hughes of Deloitte and released to The Australian by the court, also reveals that a Cayman Islands vehicle linked to the 1MDB scandal is the owner of the Avestra Credit Fund, which backed a takeover bid against Malaysian company Harvest Court Industries.
Mr Wallace-Smith and Mr Hughes said management told them the Caymans company, Bridge Global CMC, was set up “to appeal to institutional investors (particularly from Malaysia and Hong Kong)”.
It is believed Avestra executive Paul Rowles, whom The Australian has been unable to locate, was the driving force behind the company’s push into Malaysia.
Other documents filed with the Federal Court by the Australian Securities & Investments Commission show Bridge Global CMC is a portfolio (a segregated part) of Bridge Global Absolute Return Fund, which Malaysian and Singaporean media have alleged was used to cover up a $US2.2 billion hole in a joint venture between 1MDB, Malaysia’s sovereign wealth fund, and PetroSaudi, owned by Saudi prince Turki Abdullah Al Saud.
Malaysian Prime Minister Najib Razak has denied any wrongdoing over more than $US700 million deposited in his bank account in 2013 and has rebuffed calls for him to resign over the scandal.
The liquidators’ report shows that in May last year Avestra Credit Fund loaned $6.52m, extracted from Avestra’s other funds, to Zenith City Investments, registered in tax haven the Seychelles. Zenith, controlled by Malaysian businessman Eddie Chai, used the cash to help fund its bid for Harvest Court, which once boasted Mr Razak’s son on its board. In July last year, investors in the Credit Fund including two other Avestra funds and Avestra executive Clay Dempsey redeemed their units, leaving Bridge Global CMC the sole owner.
Mr Wallace-Smith and Mr Hughes said potential contraventions of the Corporations Act included failing to meet minimum cash and asset requirements, failing to file audited accounts and failing to ensure investments were properly made.
“There is no evidence to support a review of scheme assets to ensure compliance with the investment objectives, strategy, risk profile and other information disclosed in the scheme disclosure documents has occurred,” they said.
They noted management’s response that the various funds’ “external administrators provide extensive monthly NAV (net asset value) packs confirming assets held and performance”.
Avestra is part of a web of Australian, Hong Kong and Cayman Islands companies, many of which own shares in each other or have directors in common. Investors tipped about $18.5m into Avestra’s investment schemes, which suffered a dramatic loss in value in August.
ASIC has alleged that before the collapse Avestra sent $5.6m in cash and Malaysian stocks to Bridge Global CMC, potentially at the expense of retail investors.
On Friday, Justice Beach ordered the winding up of the Avestra Advantage Fund, the Excela Australian Equity Income Accelerator Fund, the Emergent Fund, the Generator Fund and the Maximiser Fund.