Police to investigate secret report into Lion Property Group's 'blatant scam'

Victorian Police will be handed a secret report into the $120 million collapse of luxury developer Lion Property Group, after it was wound up in court.

The move comes as lawyers for burned investors have labelled it a “blatant financial scam”, and lashed out at corporate regulator, the Australian Security and Investment Commission (ASIC), over its failure to act.

Michael Landy, Principal, Eagle Financial Solutions, is representing the group of investors who launched the wind-up action and was scathing in his assessment of the situation.

“It’s incredibly disappointing that ASIC failed to act sooner, despite having multiple opportunities to investigate and intervene,” he told API Magazine.

“Their inaction left everyday Australians defenceless against what we believe to be a blatant financial scam.”

The Victorian Supreme Court on Wednesday (6 August) wound up Lion Property Group Pty Ltd and 25 related companies, having placed the group in provisional liquidation on 2 July.

Certain details about the activities of the group uncovered by provisional liquidators will be handed to the Victorian Police, following orders by Justice Matthews.

“We…believe there are further serious matters that require investigation, including potentially alarming personal conduct that may have contributed to these losses,” Mr Landy said after the hearing.

Lion directors John Sader and Garry Pesochinsky were on Wednesday (6 August) ordered to provide the location of all servers and hard drives used in connection with the company, and all email accounts, including passwords.

The pair have been given until Wednesday (13 August) to comply with the order.

Mr Sader and Mr Pesochinsky have denied any wrongdoing.

Investment refund prospects look bleak

Lion had luxury property development projects in Melbourne, Brisbane and the Gold Coast and spruiked “targeted returns” as high as 65 per cent on one of its projects.

The troubles facing the group were exclusively revealed by this publication in May, including that a group of investors had launched legal action to wind it up.

As exclusively revealed by Australian Property Investor Magazine last week, the provisional liquidators found Lion’s offices were “vacated”, and that construction on its string of development projects “seems to have halted in 2024”.

The provisional liquidators report further stated that just $4 million of $122 million raised from the group’s 600-odd investors, could potentially be recovered.

Even then, there were entities that had recently secured mortgages over the group’s assets, including a lender of last resort, which was claiming $440,000.

The court was also provided with a confidential version of the report, containing additional information, which will now be handed to Victoria Police.

The provisional liquidators, Emily Seeckts and John Lindholm of KPMG, have now been appointed liquidators, and will continue their investigations.

On 25 July they told the court they had discovered a further 11 companies connected to Lion Property Group.

On Wednesday, Mr Sader and Mr Pesochinsky were ordered to have no dealings with those 11 companies for two months, with Justice Matthews extending similar orders she made on 25 July.

At that hearing, Mr Sader and Mr Pesochinsky told the court they did not have legal representation and were open to “pro-bono” assistance.

Neither Mr Sader nor Mr Pesochinsky appeared in court on 6 July. They were represented by a lawyer, who told the court he had only been given instructions by Mr Sader and Mr Pesochinsky that morning.

The provisional liquidators report revealed Mr Sader and Mr Pesochinsky created Lion in 2018 from the assets of an earlier property development company they operated, called Investments Squared.

That company had raised about $30 million from around 130 investors.

The report supports claims Lion had been operating as a “Ponzi” scheme, where money from new investors is used to make payments to existing ones.

“According to an archived version of the LPG website [retrieved through the Wayback Machine], LPG acquired Investments Squared, which at the time of the acquisition reportedly had approximately 130 active investors, circa $30 million in managed funds and 13 property developments in progress,” it states.

Mr Sader and Mr Pesochinsky deny they were operating a Ponzi scheme.

ASIC under scrutiny

Lion investor Steve Danzig said Wednesday’s outcome was a “step towards justice”.

“Today’s result is a step toward justice for the many victims of Lion Property Group, but the damage inflicted by Gary and John has been life-changing and, for some, irreversible,” Mr Danzig said.

“We’re grateful for this progress, but devastated that so many people had to endure this ordeal.

“It’s unacceptable that we were forced to take matters into our own hands, spending extraordinary time and money, because ASIC failed to act.

“Australians deserve better protection from corporate misconduct,” he said.

Mr Landy said stronger regulation was urgently needed.

“Victims should not have had to fight this hard, or spend years uncovering the truth of these crimes, without the support of the very regulator designed to protect them,” Mr Landy said.

“We urgently need stronger regulation around the promotion of investment schemes, especially on social media, and a more proactive response from ASIC to prevent collapses like this from happening again.”