‘A scale rarely seen’: Court moves on unregistered investment scheme

In December last year, the court found that Western Australian-based Chris Marco had operated an unregistered managed investment scheme and appointed Rob Brauer and Rob Kirman of McGrathNicol as liquidators for related company AMS Holdings.

The court restrained Mr Marco from carrying on a financial services business or a managed investment scheme and ordered Mr Marco and other defendants to pay ASIC’s costs in the case.

According to Mr Brauer and Mr Kirman’s evidence, 311 investors participated in the scheme and the majority of AMS’ assets consisted of “an undocumented, related party loan of investor monies from Mr Marco”, with the shortfall of investor funds from the company likely to number in the hundreds of millions of dollars.

Justice McKerracher found it was necessary to permanently wind up the scheme because of the “persistence and seriousness of the contraventions at issue; evident shortfall in investor funds; absence of any reasonably foreseeable prospect of a significant return to investors; evidence of related party and personal expenditure from investor funds; and deficiencies in record keeping as to investor entitlements”.

“Mr Marco’s unlawful conduct and attitude to financial affairs have apparently caused financial loss and no doubt related hardship to investors on a scale rarely seen,” Justice McKerracher said.

However speaking to News Corp over the weekend, Mr Marco said the judge’s findings that the purported 40 per cent returns he promised were “too good to be true” was not the case and that he was aiming to get his investors access to institutional markets under a private structure.

“When you’re dealing with $100 million, or half a billion dollars, that’s a hell of a lot of money. You’re able to trade 20 days a month and when you’re dealing with a couple of percentage points on, say, $500 million, paying out 36 per cent per year is miniscule,” Mr Marco said.

“Now, if I was selling hamburgers and trying to do it, it wouldn’t happen. It can happen in this business.”

Mr Marco said he had never defaulted on a payment to investors before ASIC commenced action against AMS and would “absolutely” still be operating successfully if the business had not been wound up.

The case was recently back in court with Justice McKerracher having ordered an interim payment to the receivers, who had not been paid for 10 months, in April.

ASIC’s most recent update on the case said its investigation into Mr Marco is ongoing.