Trio Capital manager faces jail after guilty plea

The Trio Capital fraud involved the misuse of superannuation investor money by people connected to Trio Capital. The scandal led to more than $100 million being siphoned overseas and left over 10,000 investors facing uncertainty about roughly $300 million in superannuation investments. The case has major implications for investor confidence and highlights risks around offshore placements and fund valuation.

Shawn Richard, 35, was the investment manager at Trio Capital who pleaded guilty in Downing Centre Local Court to two charges of dishonest conduct. ASIC says he dishonestly received undisclosed payments of about $6.4 million and made misleading statements about the value of investments — his guilty plea is the first formal court-level success for the regulator in this scandal.

ASIC alleged Richard and his company received about $6.4 million in undisclosed payments. More broadly, more than $100 million invested into an overseas hedge fund called Astarra Strategic has never been recovered, and the broader Trio Capital collapse affected roughly $300 million in superannuation.

Astarra Strategic was a hedge fund used by Trio Capital to place investor money overseas. ASIC documented that over $100 million put into Astarra Strategic has never been recovered and that investors’ money was routed through Astarra to overseas funds controlled by a Hong Kong businessman, where it ended up largely in virtually worthless US shares.

The article reports that more than 10,000 investors were left facing major uncertainty, with about $300 million in superannuation investments affected by the Trio Capital collapse.

ASIC froze $426 million in the Albury-based Trio Capital operation in January. The regulator also documented the worthlessness of the overseas investments placed via Astarra Strategic, secured an enforceable undertaking banning Richard from any role in financial services, and brought criminal charges that resulted in Richard’s guilty plea.

Richard pleaded guilty to offences that each carry up to five years’ jail and fines of up to $220,000 (or both), meaning he faces up to 10 years in total if sentences are cumulative. He will be sentenced next year and has admitted a third charge of making false statements about financial products. He also faces an enforceable ban from the financial services industry.

ASIC outlined that investors’ money was placed into five overseas funds controlled by Hong Kong businessman Jack Flader. That money was then swapped for virtually worthless US shares owned by Flader, and much of the reported “profits” were returned to Flader’s Australian businesses as loans, contributing to the unrecovered losses.