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BFCSA: Where is ASIC? Grupo Arcano's fraudulent tale has an Australian chapter

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Where are the regulators? 

 

Grupo Arcano's fraudulent tale has an Australian chapter

2 May 2016

Jessica Sier

http://www.smh.com.au/business/markets/grupo-arcanos-fraudulent-tale-has-an-australian-chapter-20160427-gog2vu.html

 

It's not often that a self-proclaimed multi-billionaire disappears to Malta after his personal history as an early Google investor and Stanford graduate is revealed to be false. It's even rarer for such an elaborate tale of Chilean corporate fraud to reach the office towers of Sydney.  But in the case of Alberto Chang Rajii that is exactly what happened.

 

Last year, Mr Chang Rajii, 42, was settling in nicely as a jet-set resident: he'd purchased a $2 million Sydney apartment, had opened an office for his private asset management arm and was schmoozing some of Australia's richest families.   But after years of renting a plush new office in Sydney's Bligh Street, it was abandoned. Now, boxes are stacked against the walls and newspapers gather at the door. The same goes for the unoccupied apartment at The Eliza on Elizabeth Street, where other high-profile owners include Glencore's Peter Freyberg and Argentinian and Australian land owner John Kahlbetzer.

Mr Chang Rajii's disappearance has left a trail of destruction overseas, with some employees describing the situation in Chile as a "bloodbath".   The fallout in Australia has been less dramatic, but it could have been much worse.

 

Planned investment

Last March Mr Chang Rajii told The Australian Financial Review of his plans to invest up to $100 million in local Australian businesses over the next two years.   Unlike many of the global offices, the Sydney arm, set up in July 2014 and run by Anne Miller, had a mandate only to invest in start-ups, that could be scaled globally. It had not raised any money from Australian investors. There is no suggestion that Ms Miller was aware of Mr Chang Rajii's fraudulent activities.  As it turned out, only one start-up, Future Solar Technologies, ever received a cheque. The company is developing next-generation solar cells made of hybrid perovskites instead of silicon.

 

The small research firm is based out of the University of New South Wales, and was promised $1.5 million in three instalments.  At the time of Mr Chang Rajii's disappearance in April, the team had received the first two instalments, totalling $1 million.  But two weeks ago, head researcher Professor Ashraf Uddin received a call from Ms Miller saying the Sydney branch of Grupo Arcano would close.  "She said there were international problems and she was shutting Sydney down," Professor Uddin told the Financial Review. "But we have not received the last payment of $500,000. I don't know if we will get it. I'm looking for other funding." It is understood the remaining payments are against development milestones.

 

Seeking Money

A Sydney-based entrepeneur approached by Grupo Arcano said the firm had plans to shop stakes in companies to Australian investors, but they didn't seem to have a consistent theme. Names he mentioned included water desalination company Okeanos in the United States, Cambridge Computing in the United Kingdom, social media brand Snapchat and payments platform Square. Following a similar pattern to overseas, Mr Chang Rajii appeared to be laying the groundwork to take investments from high-net worth individuals.

 

The Sydney-based entrepreneur was headhunted by Pulse Recruitment on behalf of Grupo Arcano in early March. The firm wanted to tap into his network of sophisticated high-net worth investors on Australia's east coast. The role would be based in Sydney and offer a $150,000 a year salary with a 1.5 per cent commission on top of that.  "It was a pretty attractive proposition," said the entrepeneur, who asked that he was not named because he did not want to be associated with the firm.  But he said something was "weird" about the role after meeting with Ms Miller in the sparse Bligh Street office. 

 

"It was going to be a hard job," he explained. "They were looking to fund seed-stage companies, which are innately risky and offer little liquidity."  Grupo Arcano wanted to raise at least $500,000 from individual investors but the firm wasn't interested in paying any referral fees to the advisers.  "It just seemed absurd, with that type of structure it would be almost impossible to find potential investors," he said. "It really seemed like a money grab."  Since that time the Bligh Street office has been vacated and the lease terminated and all outstanding debts paid by Ms Miller and the four employees working there have been let go.

 

When contacted by the Financial Review, Ms Miller said the Grupo Arcano subsidiary had never raised funds in Australia.  Mr Chang Rajii's Stanford credentials have been wiped from the company's website as have any references to his first investment in Google.  He is now rumoured to be in Malta. According to Chilean news outlets, La Tercera and Economia y Negocios, of the $US100 million ($A131.5 million) investors poured into Grupo Arcano and affiliate Onix Capital since 2010, only $US15 million has been invested and authorities allege the remaining funds are missing.   While the half-a-million dollars promised to Future Solar Technologies is unlikely to surface soon, Australian investors will be breathing a sigh of relief that Mr Chang Rajii's attempts to come knocking on their doors went unanswered.

 

This story has been updated to reflect the lease situation of the Bligh Street offices and the conditions of the payments for Future Solar Technologies.

 

 

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