Global hunt for British broker after millions disappear from Australian investment fund

News - Funds

Written by Ray Clancy

Tuesday, 02 March 2010 09:26

An international hunt is underway after some $125 million in Australian money invested in five offshore hedge funds has gone missing in a scam involving a veteran British broker.

In what is being called Australia’s largest missing cash case, officials are seeking Frank Richard Bell, a broker with a history of dubious deals, who was the manager of an offshore fund that received millions invested in Trio Capital’s Astarra Strategic Fund.

Money was placed in five hedge funds; Exploration, Tailwind, SBS Dynamic Opportunities, Pacific Capital Markets Cayman and Atlantis Capital Markets Cayman but the bulk was sent to Mr Bell’s Exploration Fund.

Alarm bells began ringing last October when fears were first raised that Astarra Strategic may have been a Ponzi scheme. The money in Astarra Strategic was invested through the fund manager Trio Capital, in an international transfer of funds that reveals weaknesses in Australia’s superannuation regulation.

The placement of the money was supposed to have been checked by a Hong Kong company, Global Consultants and Services. The chief executive of GCSL, Jack Flader, is also the subject of investigators’ inquiries because of the company’s central role in placing Astarra Strategic’s money in the offshore hedge funds.

The former investment manager of Astarra Strategic, Shawn Richard, has said he is confident the money still exists and claims to have documentary evidence to support this assertion. But those close to the investigation admit it is likely no funds will be recovered.

One reason is that Bell is hard to track down and has an extensive record of being fined by the US broking industry’s self-regulation body, originally known as the National Association of Securities Dealers but now called the Financial Industry Regulatory Authority (FINRA).

Bell was suspended in 2008 after failing to pay two arbitration payouts awarded against him. In a 2008 ruling, New World Financial and several staff, including Bell, were ordered to pay $378,000 for breaches of fiduciary duties and securities laws.

In a 2004 ruling, Bell, acting for World Financial Capital Markets, and Pacific Continental Securities, were ordered to pay $US67,000. And in a separate finding in November 2003, he was ordered to pay $US40,000 and barred for eight months for World Financial issuing research reports that exaggerated company performances in return for issues of their shares.