Lifetime ban for director over missing $118 million following Trio Capital collapse

The Administrative Appeals Tribunal has affirmed an Australian Security and Investments Commission ban on former Astarra Asset Management (AAM) director Eugene Liu, as the fallout from the collapse of Trio Capital continues.

Liu was a director and chief investment strategist of AAM from July 2006 until it was liquidated in December 2009, with the company in turn managing the Trio Capital subsidiary Astarra Strategic Fund (ASF).

Over 90% of the assets of ASF were invested in offshore-based hedge funds. These funds were controlled by a man named Jack Flader, who allegedly used the money to purchase shares at inflated prices. Many of these investments proved to be worthless.

As a result, Trio Capital collapsed in June 2009, taking a total $176 million from more than 6000 investors. A joint parliamentary inquiry at the time described it as the “largest superannuation fraud in Australian history”.

Following the collapse, administrators were unable to locate $118 million invested by ASF in a company based in the British Virgin Islands.

Subsequently, AAM was one of six managed investment and superannuation funds holding $260 million wound up by Trio Capital’s administrators in 2010.

As a result of the collapse, an ASIC investigation led to 11 people in total being jailed, banned from providing financial services, disqualified from managing companies or agreeing to remove themselves from the financial services sector.

Among the 11 was Liu, who was handed a lifetime ban from providing financial services in March 2013.

ASIC’s investigation found Liu allegedly engaged in:

• dishonest conduct with respect to incorrect statements made in the ASF Product Disclosure Statement
• dishonest conduct and conduct which was misleading or likely to mislead regarding a research report about ASF
• dishonest conduct in receiving more than $388,041 in payments outside his salary, as a reward for his involvement in the investment of ASF assets in certain funds; and
• dishonest conduct and conduct which was misleading or likely to mislead in hiding where ASF investment money would ultimately be placed.

Liu appealed the decision to the Administrative Appeals tribunal, on the grounds claiming he: “Was not afforded procedural fairness, the delegate made findings which were not supported by the evidence and the delegate erred in concluding that Mr Liu intended to mislead investors and acted dishonestly.”

AAT Senior Member Jan Redfern was scathing of Liu in her findings on the case.

“There is no evidence to suggest that Mr Liu has reformed or that he admits and is remorseful about his conduct,” Redfern says.

“He takes no responsibility for the significant losses of investors in ASF. Mr Liu maintained that he had done nothing wrong in his submissions before the delegate and in these proceedings.

“In this case, I have found there is reason to believe Mr Liu is not of good fame or character. Accordingly, a permanent banning order is appropriate in the circumstances of this case.”

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