media release

06-364 Illegal fundraising sees scheme promoter ordered to pay over $1 million and banned for life

Published

A promoter of illegal property financing schemes has been ordered to pay more than $1 million in compensation and penalties and banned from ever running a company again.

Ms Jan Redfern, Executive Director of Enforcement at ASIC, welcomed orders from Justice Brereton of the Supreme Court of New South Wales banning Mr Donald Richard Maxwell and seven other company officers of the failed ProCorp Investments and Central Development groups of companies, which were involved in the promotion of illegal mezzanine funding schemes.

The Court ordered that Mr Maxwell, the principal promoter for the two groups, be permanently disqualified from managing corporations. He was also permanently disqualified from providing financial services and ordered to pay $1.122 million in compensation, penalties and costs.

[Redacted on 20 January 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

The disqualification orders were made after the Court found that:

  • the schemes had been promoted without the required disclosure documents
  • representations made to investors were found to be misleading and deceptive, and
  • company officers had failed in their duties as directors.

The schemes promoted by ProCorp Investments and Central Development groups sought seed capital from investors for property development projects throughout New South Wales, including Five Dock, Liverpool, Gosford and Waitara.

The investments, which were advertised in suburban newspapers, promised returns of approximately 30 per cent per annum, and were described as ‘secured and guaranteed’. In fact, most of the investments were simply unsecured loans.

The ProCorp Investments group subsequently collapsed in 2004 with debts of $10.8 million owing to 120 seed capital investors.

The Central Developments group also failed, leaving 32 investors facing losses of $3.3 million.

[Redacted on 20 January 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

‘This case represents an example of scheme promoters and company directors acting in their own interests without any regard for the law and their obligations to investors’, Ms Redfern said.

‘They have failed in their fundamental duties to provide investors with the relevant information to help them make an informed decision about the merits of the investments, and in some instances, made false claims about the investment.

‘The orders against the schemes’ promoters and directors of the ProCorp and Central Developments groups of companies sends a clear message that ASIC will act to remove unscrupulous advisers and incompetent company directors from the investment market.

‘The unfortunate experiences of the investors in these schemes should also serve as a warning to others who may be tempted to invest in schemes offering high returns. Time and time again, ASIC sees people losing their hard-earned money by investing in illegal schemes. Our message to would-be investors is to always check that the people operating the schemes are licensed and that the investment schemes themselves are registered with ASIC’, Ms Redfern said.

[Redacted on 20 January 2020 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

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