ASIC allowed 'insolvent ISG' to operate for more than a year before $145m collapse

The nation’s embattled corporate regulator gave a failing $145 million property group its fundraising licence back despite it having frozen interest payments to investors — and been insolvent for five months.

Investigations show the Australian Securities and Investments Commission suspended the financial services licence of the failed ISG in July 2022.

Yet it reinstated the licence seven months later, in February 2023, despite the group having in the interim both frozen distributions and become insolvent.

After ASIC reinstated ISG’s fundraising licence on 6 February 2023, the group continued operating until it was placed in receivership in September last year — almost 18 months later.

ASIC refused to comment about its actions.

The circumstances around ISG’s collapse remain murky.

Liquidators Olvera Advisors have suggested the group’s 1,600-odd investors — who collectively invested around $145 million since 2019 — stand to recover very little, if anything.

Olvera Advisors have been appointed liquidators to ISG Fund Management; its two schemes, the ISG Real Estate Equity Fund and the ISG Private Access Fund; as well as at least 24 other connected companies.

ISG was founded in 2014 by its director Ben Godfrey and invested in “medium to large property projects” and “small-to-medium sized businesses”, according to ISG’s since-deleted website.

As previously revealed, liquidators Olvera Advisors have reported that ISG had likely been trading while insolvent since September 2022.

Olvera Advisors have also reported discovering the “destruction of books and records” and cases of “falsifying documentation”.

ISG investigation stalled

Yet, one year after they were appointed, very little else is known about what occurred at ISG.

Olvera Advisors state they do not have the funds to conduct “examinations” of ISG’s directors or to undertake other required investigations.

The liquidators have for many months been unsuccessfully seeking funding from ASIC to undertake the work.

“Our investigations are ongoing and at this time are focused on ongoing winding up applications…and obtaining funding from ASIC to perform examinations,” Olvera Advisors report.

“If there are identified breaches of director duties that we intend to pursue we will provide that detail in further reports.”

ASIC refused to comment when asked by Australian Property Investor Magazine why it had reinstated ISG’s fundraising licence despite it being insolvent.

ASIC said it could not comment because of its ongoing “investigation”.

“I can’t make any comment while our investigation into suspected breaches of provisions of the Corporations Act in relation to the affairs of ISG Financial Services continues,” a statement from spokeswoman Angela Friend said.

Searches show that an ASIC investigation was launched more than two years ago, in June 2023.

That was just months after ASIC gave the insolvent ISG its fundraising licence back.

Yet when ISG did collapse, 15 months after ASIC launched its investigation, it was due to action by ISG’s own directors.

ISG moved to appoint “voluntary administrators” — chosen by it — on 27 August last year.

In response, lawyers for a group of ISG investors took legal action in the Queensland Supreme Court contesting the appointment.

The court sided with the investors and on 30 September last year Olvera Advisors — chosen by the investors — were appointed receivers.

Falsified documents, destroyed records and an ASIC conundrum

The issue of investigations into the ISG collapse raises a potentially serious conflict of interest for ASIC.

ASIC is responsible for deciding whether liquidators Olvera Advisors are provided the public funds to investigate the corporate collapse.

Yet those investigations by the external Olvera Advisors could potentially uncover and report serious failings by ASIC.

ASIC has come under major public pressure over its failures regarding a string of corporate collapses, including Lion Property Group, in which more than 600 investors have lost around $120 million.

As previously reported, ASIC refused to act, with investors themselves left to engage lawyers to have the company wound-up.

In a report to creditors, Olvera Advisors have previously said ISG director Godfrey had been refusing to cooperate. The liquidator said they had sought assistance from ASIC on the matter.

The liquidators also said they had alerted ASIC after discovering alleged fraud.

“In…our Receivers’ Report, we outlined the limitations of books and records received,” Olvera Advisors wrote.

“Since the Receivers’ Report we identified instances of destruction of books and records and falsifying documentation.”

“We have notified ASIC of these incidents.”

ISG spruiked its ISG Real Estate Equity Fund as giving investors “access to property projects in strategic, high growth locations”. Its ISG Private Access Fund was advertised as being suited for “those looking to access unlisted investments with low volatility, managed risk, and solid returns”.

According to ISG’s since deleted website, it was founded 11 years ago and had “grown to include a team of specialist finance professionals”.

“Opening up high performing private sector investment opportunities to all investors was the vision of Ben Godfrey and Maree Hawcroft when they founded the organisation 2014,” it states.

“Our team has since grown to include a team of specialist financial professionals, each bringing a wealth of knowledge and decades of experience from leading Australian and overseas financial institutions.”