Peter Drake's Gold Coast mortgage fund empire is facing a class action lawsuit by disgruntled investors in his LM Investment Management suite of funds.
Piper Alderman partner Amanda Banton confirmed on Monday that the firm had been contacted by a number of concerned unitholders.
"Piper Alderman is presently investigating the conduct of LM in respect of the LM First Mortgage Income Fund to determine whether to commence proceedings against the fund's responsible entity, LM Investment Management Ltd, or any other parties in respect of the demise of that fund," she said.
Ms Banton has acted for unitholders in Equititrust's funds and for the liquidator in Elderslie Finance.
As reported by the ABC's Four Corners on Monday, the Australian Securities and Investments Commission is investigating LM for potentially false and misleading statements.
The Gold Coast fund manager LM Investment, which operates in 70 countries and says it manages $3 billion of realisable assets, has even claimed that one of its key funds is a "bank-like" facility and that it operates in Australia as a "conservative and highly-rated private bank".
At least three of LM's funds are frozen, hundreds of millions of dollars have been lost and many unitholders cannot access what is left of their savings. LM denies that it has misled investors.
Late last year, its founder, Mr Drake, brought legal proceedings against Fairfax Media for defamation over a story criticising his management of the funds. He has also claimed that he has the author of this article "under investigation".
Property funds management group Trilogy Capital is seeking to remove LM as the manager of its flagship fund, the frozen LM First Mortgage Income Fund.
In marketing to clients to defend against the incursion by Trilogy, LM has ratcheted up its fees for the funds that are still open, such as the Managed Performance Fund.
Sources said that some financial advisers had been offered about 10 per cent cash in commissions, in the first year, to pt their clients' savings into an LM fund.
Neither LM nor Mr Drake were available for comment.