Property developer Caydon caught up in alleged Korean investment fraud
The chief executive of major property developer Caydon has claimed his signature was forged as part of an alleged $400 million fraud against a Korean investment house by another developer.
Korea’s JB Asset Management has accused LBA Capital, its related company Living Bright Australia and both companies’ sole director Demetrios “James” Charisiou in the Supreme Court of Victoria of a sophisticated fraud on the multibillion-dollar investment house.
Documents filed in court by the Korean investors allege LBA Capital paid Joe Russo’s development company Caydon $30 million for 48 one-bedroom units in its Moonee Ponds apartment project in Melbourne. Caydon is one of the largest private developers in Melbourne, with large-scale apartment projects in Brunswick, Collingwood and St Kilda, and at the old Alphington paper mill.
The units in the Hall Street complex at Caydon’s Moonee Ponds precinct were meant to seed a Korean property investment fund focused on developing specialist disability accommodation (SDA) under the government-sponsored National Disability Insurance Scheme program.
In all, JB Asset Management advanced almost $395 million to LBA Capital to buy buildings to convert into accommodation, the documents show.
Mr Russo insists Caydon was not paid for any units and no property was transacted with LBA Capital, alleging instead somebody in the company forged documents with his signature.
“I can guarantee to you they have not bought anything from us. They have fraudulently used my signature. They have not bought one apartment,” he said.
Mr Russo said LBA Capital had conversations with Caydon staff about purchasing apartments. “The next thing I know I get a phone call and my signature was forged,” he said.
The Korean investors also allege LBA Capital forged title documents and signatures on another $32.2 million investment in 41 non-existent specialist disability accommodation apartments in the luxury Australia 108 Southbank development.
They claim LBA Capital instead used the money for its own benefit, and for its subsidiary Living Bright Australia, spending millions of dollars on “unauthorised” purchases of non-NDIS related property.
LBA Capital shot into the public eye after The Age and The Sydney Morning Herald revealed it had signed a contract to buy Sorrento’s landmark Continental Hotel.
In an affidavit submitted to the court after JB Asset Management obtained a freezing order over all of his company’s assets, Mr Charisiou said he owned 12 properties worth $16.5 million.
Over the course of several months earlier this year, LBA and its related companies had sunk $17.8 million in deposits on another dozen properties – including $2.1 million for the Continental Hotel – which have yet to settle. The cost of settling is estimated to be $90 million, court documents say.
The affidavit stated Mr Charisiou’s companies had $332,000 in their bank accounts, giving them total assets of $34.6 million.
A representative of the investors JB Asset Management, KB Securities and KB Kookmin Bank said “they would rather forfeit than pay the remaining [$90 million] balance of contracts.”
According to the Koreans’ account, $50 million was spent on unsanctioned property purchases, leaving an unexplained shortfall of $15.4 million.
Mr Charisiou did not return an email request for comment on the fraud or forgery allegations. His legal representatives were also contacted for comment.
After discovering the alleged fraud, the Koreans managed to claw back $245 million. Another $90 million is sitting in a trust account controlled by Mr Charisiou’s lawyer Nick Galatas from GPZ Legal.
After being confronted on a Friday last month by the Korean investors about the alleged fraud, over the following weekend Mr Charisiou transferred $50 million into his lawyer’s trust fund and another $5 million to a builder called Raffaele Aiello.
Mr Aiello did not respond to an inquiry from The Age.
The minister responsible for the NDIS, Stuart Robert, did not respond to questions.
