ASIC secures Court declarations against Goldsky companies

The Australian Securities and Investments Commission (ASIC) has announced that the Queensland Supreme Court made declarations that Goldsky Global Access Fund Pty Ltd, Goldsky Asset Management Australia Pty Ltd and Goldsky Investments Pty Ltd, have breached the Corporations Act by operating a financial services business without an Australian Financial Services Licence.

The Australian regulator had earlier obtained orders placing the Goldsky entities, which Kenneth Charles Grace is the sole Director and a shareholder of, into liquidation and freezing the assets of Mr Grace, after suspecting he used new investor funds to make payments to previous investors, which Mr Grace represented were returns, in a Ponzi scheme arrangement.

After an ASIC investigation, the Court found that the companies ran a financial services business without holding an Australian Financial Services Licence.

Although Mr Grace claimed to operate in the US, he resided in Tweed Heads, New South Wales. Investors included those from Mr Grace’s local area as well as high-profile cyclists and AFL current and former players.

The Court accepted that the companies’ bank accounts showed approximately $1 million in suspicious transactions, where funds appeared to have been used for personal purposes. The court appointed receiver noted that the estimated shortfall of investor funds is $12,547,904.

Let’s recall that, in February this year, the United States Securities and Exchange Commission (SEC) said it was barring Mr Grace from the industry.

The SEC’s announcement states Mr Grace is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, with the right to apply for reentry after two years to the appropriate self-regulatory organization, or if there is none, to the Commission.

According to the SEC’s complaint, Goldsky’s Forms ADV filed with the Commission in 2016 and 2017, which Kenneth Grace signed, stated that its hedge fund, Goldsky Global Alpha Fund, LP, had an auditor, a prime broker and custodian, and an administrator. In addition, in its Forms ADV and Forms ADV Part 2A, Goldsky stated that it managed over $100 million in discretionary assets under management. Goldsky’s website also claimed that Goldsky Fund earned: 19.45% compounded annual returns since inception, 70.33% compounded monthly returns since inception, and 25.30% returns for the year ended September 30, 2017.

The SEC alleges that these statements were false and misleading because Goldsky, Grace and Goldsky Fund had no agreements with service providers, Goldsky and Grace did not manage $100 million of assets, and Goldsky Fund did not have any investment returns as it never had any assets.