ASIC takes former Keystone Asset Management directors to Court over alleged Shield failures

The Australian Securities and Investments Commission (ASIC) has initiated Federal Court proceedings against former directors of Keystone Asset Management Ltd. The regulator alleges Paul Chiodo, Ilya Frolov, and Mark Yorston breached their director duties, while Jeremy Danon and Mr. Frolov failed in their obligations as compliance committee members.

ASIC claims the former directors and compliance members endangered hundreds of millions in Australian superannuation by investing scheme funds into related entities and third parties without adequate safeguards. The Shield Master Fund, managed by Keystone, received over $530 million from approximately 5,800 investors.

Approximately $305 million of these funds were allegedly transferred to a related property development fund controlled by Keystone before being moved to entities linked to Mr. Chiodo and Mr. Frolov. ASIC alleges the transfers lacked basic safeguards such as proper security, valuations, and conflict management.

The regulator further contends investor money was used for unauthorized purposes disconnected from the intended property projects, including payments to related parties without member approval. It also cites failures to obtain asset valuations and manage conflicts of interest as required by the Shield Compliance Plan.

ASIC is seeking civil penalties, disqualification orders, and costs. Its investigations into Shield-related matters continue. The registered managed fund, established in May 2021, was recommended for termination by liquidators in April 2025 in the best interest of investors.

ASIC had halted new investment offers in Shield in February 2024 and took protective action in June 2024, preserving shares later sold by liquidators. The nearly $200 million in proceeds were deposited for the benefit of unitholders. Liquidators are also pursuing asset recovery proceedings to preserve up to $158 million in additional assets.

Following a Court Enforceable Undertaking with Macquarie, approximately 3,000 investors have recovered $321 million. ASIC also has ongoing proceedings against Equity Trustees Superannuation Limited related to Shield.