‘Everyone thinks I’m a criminal’: The millennial money manager and the missing millions

By Sarah Danckert

Mitchell Atkins was once at the top of world, now his business empire is in tatters. Credit: Marija Ercegovac

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It had been a long morning for millennial money manager Mitchell Atkins in the windowless, soundproofed room at the corporate watchdog’s office on the fifth level of 100 Market Street in Sydney.

For nearly three hours in late October last year, the blond, bespectacled 31- year-old had been quizzed by two investigators from the Australian Securities and Investments Commission about the collapse of his investment empire, Magnolia.

Magnolia, started in 2015 by Atkins in the basement of his family home on the Central Coast of NSW, had clients across Australia and had $1 billion in funds under advisory.

Its investors included some of Australia’s richest families, including the family of Melbourne business magnate and philanthropist the late Victor Smorgon, as well as successful entrepreneurs, barristers and private investors with self-managed superannuation funds.

Magnolia claimed to operate the best-performing share fund in the country. It also ran a private lending business that helped to arrange loans for borrowers looking to complete property developments or buy more exotic items, such as a $1.2 million Ferrari, and offered investment in a fund holding a $30 million Lamborghini Essenza SCV12.

On that day in October, ASIC had called in Atkins for a formal interview, known as a Section 19, after a series of complaints from investors. The transcript of the interview has been obtained by this masthead as part of its investigation into the Magnolia empire.

During the interview, the regulator heard the most incredible tale of the Magnolia business, as Atkins – who cut his teeth in the business restructuring departments of Deloitte and BDO – tried to explain how and why tens of millions of investments – perhaps as much as $60 million – had gone missing.

Atkins told ASIC a story of handshake deals with no paperwork, friendly payments to mates, the late-night theft of an office fridge and boxes of company documents that had gone missing. He would also attest that he made interest payments to his investors “out of the goodness of our heart” and blamed court actions against him and his group and sharemarket brokers for much of his problems.

It appears from the transcript that ASIC had its doubts.

“Just one final question,” senior ASIC investigator and lawyer Peter Paleologos said, staring across the large table that nearly filled the room.

“Has any of the clients, investors, called you recently, about their money … [saying, ‘do you] know where the funds are?’ Did anyone, any of the investors … ring you around July, June-July and accuse you of theft or fraud – or Magnolia?”

Atkins replied: “Everything’s in litigation. People aren’t happy to go on record. Some people are out to get me. I’ve got major security concerns. But it’s mainly no one’s really talking to me.

“Everyone thinks I’m a criminal, and it’s up to me to prove that I’m not.”

Atkins has not been charged with any offence, although an investigation by this masthead can reveal that ASIC and liquidators are probing those very suspicions of criminal conduct by Atkins.

This masthead has also found documents that shed new light on Atkins’ claim that Magnolia’s woes were tied to unscrupulous share brokers. This masthead can also reveal that the day before ASIC’s June 19 request to the Federal Court to temporarily ban Atkins from travel, a person associated with Magnolia and Atkins emailed investors claiming ASIC was in the process of approving a settlement offer from Atkins when it was not.

The missing pieces

Magnolia’s business began crashing into liquidation last year, amid allegations by several clients, including David Koadlow and Bindy Smorgon Koadlow (Victor Smorgon’s youngest daughter), of misleading and deceptive conduct, allegations Atkins denied.

When liquidators got access to Magnolia’s scant books and records they found bank accounts that should have been flush with cash empty and assets unable to be located or encumbered to a third party.

Liquidators Todd Gammel and Matthew Levesque-Hocking, who work at HLB Mann Judd and are in charge of investigating the two main entities – Magnolia Capital and Magnolia Credit – allege Atkins received a $25 million loan from Magnolia that was never repaid. Atkins has claimed money he is owed by the entities would balance out against his loan.

Some creditors are furious after being told to expect zero cents in the dollar return. “I can understand that getting an offer for 5¢ in the dollar, but no cents in the dollar, no return for anyone across any of the businesses; that just can’t be possible. It doesn’t make sense,” one client of Magnolia says.

Mitchell Atkins at his wedding to his childhood sweetheart.

Atkins declared himself bankrupt in May. He reported he had no directly owned real assets or property and just $312 in cash and in his bank accounts. He claims he is owed nearly $16 million, including many millions from various Magnolia entities.

According to a file note dated May 31 this year included in ASIC’s court filing, staff at Atkins’ bankruptcy trustee still don’t have a full picture of his wealth. “Bank statements – Mitch said this was too hard and shrugged, asked me to request from the banks instead,” the note says.

Late last month, Federal Court Justice Angus Stewart released to this masthead a cache of documents filed by ASIC when it obtained travel bans against the young fund manager. Atkins’ lawyers had opposed the release of the documents and had, unsuccessfully, sought to suppress some of ASIC’s filings.

The ASIC investigation sheds light on its investigation into Atkins and Magnolia, which operated out of offices in Sydney and Melbourne, as well as in the sleepy NSW Central Coast towns of Terrigal and, later, Erina.

ASIC’s list of “suspected contraventions” include fraud and other criminal offences, including making false and misleading statements, making reckless or dishonest statements and dishonest conduct.

ASIC senior manager of enforcement Mark Pangbourne outlined ASIC’s concerns in court documents, listing eight examples of separate investors with complaints against Magnolia or Atkins.

“In each case it is apparent that the current whereabouts of the investors’ money cannot presently be determined,” Pangbourne said.

“The reasons for this, so far presently understood, appear to be either the investor money was never placed into the investment which had been promoted to the investor or that they were invested but when the principal amount was due [and able] to be returned the investor did not receive it.

“Further, ASIC has not been able to rule out the possibility that the missing funds have been transferred offshore.” (Atkins told ASIC’s investigators and his trustee in bankruptcy he had no offshore assets.)

ASIC told the court one of its delegates had recommended banning Atkins from managing corporations for five years, though no banning order had been issued.

Making millions, the Magnolia way

The documents also shed new light on Magnolia’s business operations.

Magnolia’s key business was its private lending operation that matched investors, such as privately wealthy people or cash-rich businesses, with borrowers.

When Magnolia provided a loan to a borrower – for example, a line of bridging finance to help a developer complete a project or a loan for a business to meet a tax bill – Magnolia would take security over an asset (or assets) of the borrower.

The Lamborghini Essenza SCV12. Magnolia set up an investment holding one of these $30 million vehicles. It is one of only 40 models ever made.

Many of Magnolia’s borrowers were upright citizens. Atkins also told ASIC in his interview that some loans were provided to “credible guys that had a blemish on their record. Maybe they have, I don’t know, been a director of a failed company at some point in their life. They sit … just outside the bank.”

When payments on a loan were missed, Magnolia would promptly issue wind-up orders and often take ownership of the business or the assets that were linked to the loan.

Magnolia’s lending business was, initially, very profitable, and many investors were happy with the handsome returns it delivered, particularly between 2018 and 2021. “A lot of people made a lot of money over those years,” one investor said.

Not all clients of Magnolia were happy. Over the past four years, Magnolia was hit with allegations it could be a harsh lender, often adding additional fees to transactions – whether deals were completed or not.

Listed residential real estate agency group, The Agency, was one of the groups that had a bad experience with Magnolia.

In 2019, Magnolia became a 17.9 per cent shareholder in The Agency, tipping more than $3 million into the struggling business. The Agency, then led by Paul Niardone, was also in discussions to see if Magnolia could help refinance its debt.

Former managing director of The Agency Paul Niardone and former chief Matt Lahood.Credit:

An adviser familiar with the business relationship, who spoke on the condition of anonymity, said at a dinner in Perth shortly after a draft debt deal was discussed that Atkins told them his general aim with his lending business was to take the assets of the borrowing company. “I felt sick, instantly sick,” the source said.

The Agency backed out of the deal and in the bitter dispute that ensued, a Magnolia entity launched a hostile takeover offer for the group that was rebuffed. Magnolia soon appointed administrators to the group over a disputed $379,000 additional unpaid fee. The Agency successfully challenged the appointment of administrators in the Federal Court and the administrators were tipped out. Atkins still claims victory in this battle, pointing to the fact that The Agency now has new leadership and trades below his original takeover offer.

Magnolia’s “margin loans”

In about 2020, when the sharemarket was feverish thanks to the pandemic, Magnolia sought to develop a new income stream from a share investment business.

Between June and November 2021, Atkins managed to secure a $12 million investment in Magnolia’s share trading business from the Koadlows. They would come to regret this investment.

When Magnolia failed to open the bank accounts for the new fund that David Koadlow thought was being set up to trade his shares, he began to complain. By June 2022, Koadlow was demanding the return of his money. When Magnolia did not accede to its request, the Koadlows accused Atkins and Magnolia entities of misleading and deceptive conduct in the Federal Court.

David Koadlow and Bindy Koadlow, the daughter of business magnate and philanthropist Victor Smorgon.

Atkins blames this lawsuit and the activities of share brokers for pushing his business to the brink of collapse. He said: “I wish to reaffirm that Magnolia was an extremely profitable venture [making several million dollars a year] until we were hit with the margin calls.”

Magnolia’s failure being linked to margin calls is a long-standing claim made by Atkins.

However, the term “margin call” can mean different things to different people.

Often, a margin call refers to a special type of loan in share trading known as a margin loan. Using a margin loan, investors can buy more shares in a particular company they like using a bit of debt. As part of these loans, investors provide security – usually cash or shares. If the share price suddenly tumbles, the broker will issue a margin call to tell the investor that they better start selling their shares or tip in more collateral.

Atkins has confirmed to this masthead that he was referring to a different type of margin call, one that is associated with a contract for difference (CFD) – a type of financial betting product.

As a wholesale investor, Magnolia and Atkins were able to buy these high-octane betting products to make bets on whether a share price would increase or decrease. Wholesale investors can use ultra-high leverage to amplify those bets. If they win the bet they make huge sums, but if they lose they can be liable to pay hundreds of times the amount they put in. It’s further complicated because a CFD holder also has no ownership of the assets (like shares) the bet has been placed on.

Atkins, who used a variety of brokers, including Invast Securities, says it’s “semantics” to draw a distinction between the two types of margin calls.

“While it’s correct to say that Invast did not provide a traditional margin lending account, they indeed offered a contracts-for-difference facility to both Magnolia’s Microcap Fund and Magnolia Equities Trust [although no trades were placed by the latter], as well as to me personally.

“The potential risks associated with CFDs were explicitly outlined in the fund’s documentation.”

Atkins insisted to this masthead that he provided information about other margin loan accounts to the Federal Court in response to requests by the Koadlows. However, in February this year, Justice Timothy McEvoy threw out Atkins’ defence for continual non-compliance with court orders, noting that Atkins had failed to provide adequate information of the margin calls or his margin loan accounts.

Atkins did, though, buy shares on behalf of himself, Magnolia’s entities and on behalf of the Koadlows, but it was not without problems. Citigroup says it is owed $4.7 million after Magnolia placed orders to buy shares but failed to complete two transactions after allegedly failing to give instructions to its prime broker.

Magnolia’s unusual offer

Despite his troubles, Atkins is still trying to salvage his business and reputation.

This masthead has obtained emails sent from an associate of Atkins to investors in June, spruiking a “settlement offer” that claimed it could provide a better outcome to creditors.

The emails implied the deal was approved by ASIC. “The draft settlement offer is currently under ASIC’s scrutiny and approval. The timeline for this proposal is dictated by ASIC’s schedule.”

The emails were sent on June 18 and June 19 – the same day ASIC was preparing to stop Atkins from leaving the country.

Those familiar with ASIC’s investigation but not permitted to speak on the record said the regulator had not been considering a settlement offer.

A spokesperson for liquidators Gammel and Levesque-Hocking said: “The liquidators are aware of various correspondence sent to Magnolia investors in June 2023 including a draft proposal. The liquidators have not received a formal proposal regarding potential terms of settlement.”

Liquidators said in a circular to creditors sent on June 23 that ASIC had asked it to clarify the offer. “ASIC has not considered the merits of any proposal regarding the Magnolia Group,” the letter said.

Atkins said he stood by the emails sent to investors, particularly the sentiment that he could provide an alternative settlement process for investors outside the liquidation process.

“The repayment funds would be sourced from the remaining assets of the Magnolia Group, as well as any related party assets. This includes any surplus from my bankruptcy estate,” says Atkins.

“My primary objective has always been to ensure the repayment of all investors.”

Whether that version of events correlates with what ASIC and liquidators believe will no doubt pan out over the coming months.

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