Fraser Island resort plan may be in trouble

News Desk

In April 2023, it was announced that there was a plan to spend AUD250 million to develop a resort on Queensland's Fraser Island in association with a local Aboriginal group. The development by Chiodo as ASIC has gone loud in its investigation of another venture by Chiodo's boss, Paul Chiodo.

The Development was in hot water from day one: Chioda's discussions were with one family, said Christine Royan of the Butchulla Aboriginal Corporation, telling The Toowoomba Chronicle "We will not support how they have approached this, by going to one family without coming to the prescribed body corporation.” The island is a UNESCO World Heritage site.

But little if any progress has been made.

That might be a good thing. Today the Australian Federal Court, on the application of ASIC, obtained an order freezing the assets of the Shield Master Fund (Shield), a registered managed fund whose responsible entity is Keystone Asset Management Ltd (Keystone), ASIC says.

Under the Order, pending investigation into Keystone, Keystone is restrained from:

* removing property from Australia,
* selling, charging, mortgaging, dealing with or disposing of property,
* incurring new liabilities, or
* withdrawing, transferring, disposing of, or dealing with money held in bank accounts or with a financial institution (subject to limited exceptions).

It is not known at this stage whether Keystone is directly or indirectly involved in the Fraser Island project.

But a shadow is cast by another Order granted today: The Court made orders that Paul Chiodo, a former director of Keystone, surrender his passport and be restrained from leaving Australia.

The Orders were made ex parte and therefore Keystone and Mr Chiodo have had no opportunity to respond. If the Orders are found to be unwarranted, ASIC is on the hook for substantial damages and costs.

But it's not ASIC's first action against Keystone: in February, ASIC made interim stop orders on four product disclosure statements. At the time, ASIC said "The interim orders stop Keystone from offering, issuing, selling or transferring interests in the Balanced class, Growth class, High Growth class and Conservative class units of the Fund. ASIC made the interim orders to protect retail investors from acquiring products under PDSs that may be defective and not worded and presented in a clear, concise, and effective manner. "

Those orders were subsequently revoked when Keystone said the products would not be offered.

But ASIC's original concerns were extensive:

"ASIC is concerned that the PDSs for the Fund may:

- contain misleading statements regarding Keystone’s legal role in unregistered schemes the Fund has invested in;
- not adequately disclose the nature, quantum and risks associated with the Fund’s investments in unregistered funds related to Keystone;
- contain misleading statements about the level of diversification of the assets of the Fund;
- not adequately disclose the performance fees that may apply;
- use inappropriate asset classifications to describe the investments in the underlying funds and the investments within those funds;
- give the impression that investors can make weekly withdrawals from the Fund when redemptions are at the absolute discretion of Keystone and may be subject to a two-year redemption lock-up period;
- not adequately disclose the conflicts of interest associated with investments in funds related to Keystone or how Keystone managed those conflicts;
- fail to disclose a change in the directors of Keystone or any information about the new director, their skills, experience and role; and
- to disclose the Fund’s investment approach to ethical considerations in a clear, concise and effective manner."

The story, and any consequences for the Fraser Island development, will continue.