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ASIC, Investments

Mayfair 101 offering shut down

Mayfair 101 debenture

ASIC has been successful in its application to have secured debenture issuer M101 Nominees, promoted by the Mayfair 101 Group, liquidated.

The Federal Court has issued orders to have M101 Nominees Pty Ltd, a secured debenture issuer promoted by the Mayfair 101 Group, wound up as a result of an application to do so from the Australian Securities and Investments Commission (ASIC).

M101 Nominees was the entity that issued the debentures known as M Core Fixed Income Notes and the corporate regulator applied to have the entity liquidated in order to protect the assets of M101 Nominees and the interests of M Core noteholders.

ASIC stated it took action due to the fact current investors had been informed about a liquidity event by the product provider, there appeared to be insufficient funds to allow investors to redeem their monies, and the concerns raised by external administrators appointed to other Mayfair 101 products about how the M Core investments had been managed in a manner that was to the detriment of investors.

Said Jahani and Philip Campbell-Wilson of Grant Thornton were appointed as liquidators following the court’s decision on 29 January to order the wind-up of M101 Nominees on just and equitable grounds.

The same parties had been appointed as provisional liquidators pending the result of ASIC’s application to secure final winding-up court orders.

M101 Nominees raised around $67 million during 2019 and 2020 after incorrectly claiming any funds invested would be fully secured. From March 2020, investors’ funds were no longer repaid and interest payments were also stopped in June 2020.

The provisional liquidators confirmed on 24 September 2020 that a series of issues existed within the operations of M101 Nominees, including the entity had been insolvent since its inception in October 2019 and that its business model was unsustainable given it was raising funds on a short-term basis of six to 12 months and then on-lending the monies on a 10-year time frame, with the mismatch impairing the ability to repay capital.

Further, Grant Thornton established distributions and redemptions paid to M Core noteholders were funded from money raised from other M Core noteholders, or to a lesser extent from investors in other unsecured debentures Mayfair 101 promoted, security provided for the debentures had little or no value and the realisable value of assets M101 Nominees held was negligible and insufficient to repay M Core noteholders.

M101 Nominees has consented to the court orders.

“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.”

The regulator is also seeking orders to permanently restrain Mayfair 101 Group director James Mawhinney from certain activities, including soliciting funds in connection with any financial product. This matter is scheduled to be heard on 15 February.

The Mayfair 101 Group owes about $211 million to individuals who invested in a range of financial products, including M Core Fixed Income Notes, M+ Fixed Income Notes, the IPO Wealth Fund, IPO Capital and Australian Property Bonds.

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