October 27, 2025
It’s the kind of news that sends a chill down the spine of every Australian with a superannuation account. Yesterday, Netwealth, an ASX-listed financial giant with a market cap of nearly $8 billion, formally asked the federal government to use public funds to bail out its members to the tune of $101 million.
These investors were exposed to the catastrophic collapse of the First Guardian Master Fund, a fund that liquidators now allege bears all the hallmarks of a “Ponzi scheme.”
This request—to have taxpayers cover losses from what Netwealth itself is calling “fraudulent conduct”—is a shocking admission of a system in crisis. Netwealth, along with other superannuation trustees like Equity Trustees (facing a $60 million exposure) and Diversa, were the gatekeepers. They added First Guardian to their investment menus, giving it a stamp of legitimacy that thousands of Australians relied on.
Now, with over $100 million in investor funds vaporized, and 6,000 ordinary people facing financial ruin, the question isn’t just “Who committed the fraud?” The real question is: who was supposed to be watching, and why did every single line of defense fail?
This wasn’t a sophisticated, undetectable crime. It was a slow-motion disaster that regulators, auditors, and platform trustees allegedly watched happen for five years.
Level 1: The Directors and the Lamborghini
At the top of the hierarchy of blame sit the directors of Falcon Capital Limited, the responsible entity for the First Guardian fund. The details emerging from the liquidator’s (FTI Consulting) report are not just alarming; they are cinematic in their audacity.
The fund, which raised over $640 million, is now in liquidation. Directors David Anderson and Simon Selimaj have had their assets frozen and travel restricted by the Federal Court.
The liquidator’s findings paint a damning picture:
- “Ponzi Scheme” Behavior: The fund was allegedly using new investor money to pay out redemption requests from earlier investors—the classic definition of a Ponzi scheme.
- Misappropriation: Over $40 million was reportedly paid to third-party marketers directly from the fund itself.
- Lavish Spending: Company funds were allegedly used to purchase a $548,000 Lamborghini Urus for director Simon Selimaj.
- Dubious Transfers: A staggering $242 million was funneled to offshore entities with “significant doubt as to their recoverability,” while another $68.9 million was directed to entities linked to director David Anderson.
If these allegations are proven, the primary culpability rests with a small group of individuals who allegedly built a house of cards and enriched themselves with other people’s retirement savings. But they didn’t do it in a vacuum. They did it with the implicit approval of a system that was supposed to stop them.
Level 2: The Phantom Auditors and the Sleeping Regulator
The most catastrophic failure in this saga does not involve the alleged fraudsters, but the very people paid to catch them: the auditors and the regulator.
An audit is the foundational promise of the financial system. It’s the independent, expert verification that the numbers are real. In the case of First Guardian, this promise was a farce.
Reports indicate that the fund’s listed auditor, Audit Services Plus, was voluntarily deregistered in June 2022. Despite this, audit reports continued to be filed with and accepted by the corporate regulator, the Australian Securities and Investments Commission (ASIC), until October 2024.
Let that sink in. For over two years, the fund’s financial statements were apparently being “audited” by a non-existent firm.
When another firm, Audieto Australian Pty Ltd, lodged the most recent compliance report in October 2024, it, too, was reportedly found to “no longer exist” just a year later.
This is not a matter of professional judgment; it is a fundamental breakdown of the most basic regulatory checks. How can ASIC, whose very job is to maintain the register of auditors, accept reports from a firm that is not on that register?
This failure is compounded by the fact that ASIC was reportedly first warned about potential wrongdoing at First Guardian as early as 2020, just one year after its launch. Warnings about Falcon Capital’s directors had allegedly been trickling in for years before that.
The regulator was warned. The audit reports were invalid. Yet the fund continued to operate for another five years, sucking in hundreds of millions of dollars.
Level 3: The Gatekeepers and the “Favourable” Rating
This regulatory and audit failure had a disastrous domino effect. Superannuation platforms like Netwealth, Equity Trustees, and Diversa are legally required under APRA Prudential Standard SPS 530 to conduct due diligence on the products they offer.
They will likely argue they were misled by the fraudulent, but seemingly official, audit reports.
Adding another layer of false security was the research house SQM Research, which gave First Guardian a 3.75 out of 5 rating—described as “Favourable” with “no corporate governance concerns.”
This creates a perfect circle of blame. The platforms trusted the researchers, the researchers trusted the auditors, and the auditors were, in some cases, literal phantoms. ASIC, the one body supposed to be watching all of them, failed to act on the most basic red flag: a report from a deregistered entity.
Level 4: The Tainted Advice
The final link in the chain was a small group of financial advisers. While the Financial Advice Association of Australia (FAAA) has been quick to point out that only a handful of firms were involved, the damage was concentrated.
One adviser, Ferras Merhi, is under investigation for allegedly funneling 3,600 clients and $192 million into First Guardian. It’s alleged he received at least $13 million in marketing payments and inflated loans from the fund, creating a massive, undisclosed conflict of interest.
For advisers like this, who were allegedly complicit, the blame is high. But for hundreds of other advisers, they too were likely victims of the same lie, recommending a product that was rated “Favourable,” available on Australia’s biggest super platforms, and “audited” every year.
The System Is Broken
The First Guardian collapse, and the related $321 million failure of the Shield Master Fund, is not the story of a few bad apples. It is the story of a rotted orchard.
Every single watchdog—from the auditor to the research house, the platform trustee, and the national regulator—failed.
Netwealth is now asking the government for a bailout. But this is not a natural disaster; it’s a man-made one. It was enabled by a regulator that was asleep at the wheel and a system of checks and balances that proved to be worthless.
The 6,000 victims of First Guardian don’t just deserve their money back. They deserve an assurance that the system that so profoundly failed them will be torn down and rebuilt.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. The information presented is based on publicly available materials, news reports, and documents related to the liquidation as of October 27, 2025. All allegations detailed are subject to ongoing investigations and legal proceedings.