Were alarm bells ringing about LM? Did the Australian regulators hear them? Were they told?
Apparently yes. 

More revelations today in correspondence with Peter Drake and Linda Darcy at LM reveal how legal action was threatened by Drake who wanted to keep a lid on what what going on.

If it walks like a duck and talks like a duck….Martin Terpilowski tells LM it is operating a Ponzi scheme.

But LM admit taking from Peter to pay Paul. Meanwhile  LM Managed Performance Fund was investing in a pile of bricks in a collapsing property market.

Regulatory officials of course did nothing.

From: Martyn Terpilowski
Sent: Friday, 16 January 2009 11:59 PM
To: Lisa Darcy
Cc: Peter Drake; [Martyn’s Colleague]; [Martyn’s Colleague];
Subject: Increased concern


I am sorry but I am looking at this seriously now. Clients get income 11 days late when they never did last year and investments in bonds which should automatically redeem do not as they did before – This is a serious concern of me and my team and suggest a fund with financial issues. I am trying my best to be positive but this is reality and we are talking an Australian property and mortgage related fund. We need some serious assurances now. I can easily give you the cases but things are being made pretty obvious.



Lisa Darcy

From: Lisa Darcy [ldarcy@LMaustralia.com]
Sent: Tuesday, January 20, 2009 7:24 AM
To: Martyn Terpilowski
Subject: RE: Increased concern

Dear Martyn,

There is nothing to worry about with LM. We are managing the funds with caution in these difficult times.

LM is still currently accepting new business into the funds, however our investment inflows were very low this month – this is contributing to the liquidity issues we are facing with the LM CPAIF.

As you know we are currently seeing delays in relation to redemptions for the LM Currency Protected Australian Income Fund and any new applications we receive at the moment we are advising advisers/clients of these delays and are suggesting longer term investments (at least 12 months) or alternatively advisers can use our new product “The LM Australian Income Fund – Currency Protected” – this fund is brand new and not having any liquidity issues with mortgage assets.

The LM funds have had an issue this month with UBS our currency provider in relation to the FEX margin requirements – they have unexpectedly advised us of the increase to their margin requirements from 5% to 20%. (this was done across the board in Australia to all of UBS’s clients and was no reflection on LM)

This has caused a cashflow strain on the funds as we need to ensure that these requirements are met – we are in the process of changing providers and once this occurs the surplus cash will be released back to the funds.

The audited financials for the LM mortgage funds are almost complete and they will verify that the unit price remains at $1.00 (I will send through as soon as they are signed which will be during this week, Ernst Young are in our office today finalising the accounts).

The LM Managed Performance Fund has NOT been affected by the liquidity issues from borrowers – however has had to meet its FEX margin calls – we are currently paying redemptions from this fund (generally 30 days after maturity).

Peter Drake and I look forward to meeting with you and the team on the 6th Feb – if possible i was wondering if we could make the time now at 2pm???

We are doing all we can to minimise any disruptions to clients and will sending a broadcast update out shortly.

Best Regards


Martyn Terpilowski

From: Martyn Terpilowski
Sent: 21 January 2009 07:56
To: ’Lisa Darcy’
Cc: [Martyn’s Colleague]; [Martyn’s Colleague]; Peter Drake (pdrake@LMaustralia.com)
Subject: RE: Increased concern


Financewriter.com – an apt cartoon published when Madoff was arrested

The main issues I see are simple – I recently talked to a very senior player at Real Estate at Macquarie in Australia who expects property prices in Australia to collapse. This is a view shared by many economists.

 It is obvious inflows would be low. I have AUD350,000, I am trying to find a short term (1-2yr) home for and just do not feel comfortable with this right now.

You should not really admit that slower inflows in turn affect outflows as that is the issue with lots of funds and is actually what Bernie Madoff was doing – as long as it kept going up, people put more money in and he could therefore give it to the few people who wanted to redeem. This works fine until inflows stop – we all know how this works and it is very worrying. The truth is though that the property/mortgage sector is the worst sector in a terrible world right now and risk is certainly increased in this sector. Maybe even higher than equities.

We know redemptions are slower, but I would not tell people that you are waiting for more money to come in before you can give theirs back. It is worrying. The bigger issue is that income is now late etc – clients realise that in these market conditions, with this type of fund, this could be cause for concern.

I know the unit price remains at $1 but it does not stop the worry as any sensible person looking at this would be concerned, not because LM – but because the sector. The issue is that this does not matter if the fund suddenly hits trouble and has to right down the price suddenly (as many such funds have) due to huge drops in underlying asset classes.

Thanks for the info on the MPF – I guess I am concerned like I was with Brandeaux – for mths they just denied they could be dragged into this and look what has happened. I fear a FIRST EVER right down of unit price there as people will not be rushing to invest in the fund when it reopens and sensible brokers will probably look to lessen their exposure.

Moving to 2pm on the 6th is fine. I look forward to meeting you both then. I am not meaning to be troublesome but this is very important to me.

Best Regards


October 2009

Martyn Terpilowski

—– Original Message —–
From: Martyn Terpilowski
To: Heather C. McLeish; Lisa Darcy
Cc: [Martyn’s Colleague]; [Martyn’s Colleague]; [Martyn’s Colleague]
Sent: Fri Oct 30 13:56:48 2009
Subject: Now very, very worried

Heather and Lisa

We have just discovered something we never knew before and I am very
worried and also now know for a fact that LM have directly lied to us,
time and time again. That after the support we have given them over the
years is very upsetting indeed. Obviously I have already made my
concerns clear, but now economical with the truth has become lying. This
is no longer ‘candor’ and I am pretty upset at the situation as are all
other advisers here.

We have just talked to a client who put a redemption request in January
this year, for a May redemption. He gave the 3 months notice as
requested by LM.
In May he was told no redemptions and as of today he has still had no
redemption proceeds.

I have it in black and white from LM well after the above dates ‘there
are no issues with redemptions on the MPF’. This is clearly a lie.

During this time you have taken money in (and lied repeatedly) and it is
obvious now the offer for the rollover getting an extra 3% if done in
June this year, was to give you more time to deal with this and keep it
This is truly disgraceful.

All other companies with redemption freezes, stop taking money in and at
least write to clients and brokers to explain this. LM just say that
‘the fund is in good shape’ which is clearly not true. Having made a
call this morning to LM we have been told that because ‘little money is
coming in’ right now, ‘no money can be paid out’. This is called a Ponze scheme.
Please Google it, to see a description.

LM have had many, many chances to tell the truth here and chose not to.
The seminar at the Conrad, Peter’s trip here etc. I have asked the
question many times and been directly lied to. Unfortunately that gives
me no confidence whatsoever in LM.

To be honest at this stage I need the details of the regulator of LM, so
please forward as I believe it is your duty to do so. This is wholly
unacceptable and direct lies can be proved as are in writing in black
and white in these emails. I have asked time and time again when I have been
told lies.
That does not sit well with me at all.

I don’t want to be told the fund is in ‘good shape’ or be told by Peter
he will ‘take clients to see the buildings’ or that the ‘unit price has
been steady forever’. It does not matter if you cannot get your money
out and LM lie to people.

It amazes me that people think I ask too many questions, well I
certainly did not get the right answers did I and now feel compelled to
make a formal complaint.

I look forward to hearing from you very soon.

Best regards


Lisa Darcy

—–Original Message—–
From: Lisa Darcy [ldarcy@LMaustralia.com]
Sent: Friday, October 30, 2009 1:21 PM
To: [Martyn’s Colleague]; Heather C. McLeish
Cc: Peter Drake
Subject: Re: Now very, very worried

Martyn, thanks for your email – we will come back to you shortly with a
formal response. The MPF is not frozen, we have paid and are continuing
to pay redemptions throughout the course of this year – from time to
time payment periods have been extended due to market conditions and the
type of fund investments. Most recently the strength of the AUD has
caused additional demands on liquidity. The fund is not a ponzi scheme,
it invests in real assets and has independant accounts prepared
annually. We will be in further contact with you. Lisa

Martyn Terpilowski

—–Original Message—–
From: Martyn Terpilowski
Sent: Friday, 30 October 2009 1:39 PM
To: Lisa Darcy; Heather C. McLeish
Cc: Peter Drake; [Martyn’s Colleague]; [Martyn’s Colleague]; [Martyn’s Colleague]
Subject: RE: Now very, very worried


We have a client who has not been able to redeem since January. That is
9 mths.

If you can only pay out when money comes in it has the hallmarks of such
a scheme.

We have repeatedly been told and have it in writing that there are no
issues with redemptions on MPF (as per the previous email). This was
particularly when you were trying to raise more money from our clients and
we were told there were no such issues. We were only told this after a
redemption request was denied.

Money should not be taken in, when redemptions are not being paid.

I look forward to receiving the regulators details.

Sorry – but something is very wrong here. What you are telling me is
contrary to what clients are telling me and they are not best pleased
that we did not tell them first.


Peter Drake

—–Original Message—–
From: Heather C. McLeish [hcmcleish@lmaustralia.com]
Sent: Friday, October 30, 2009 4:05 PM
To: Martyn Terpilowski; Lisa Darcy
Cc: Peter Drake; [Martyn’s Colleague]; [Martyn’s Colleague]; [Martyn’s Colleague]
Subject: RE: Now very, very worried

Hi Martyn, Peter Drake here.

I am in Tokyo right now and until Tuesday midday.

Whilst I can appreciate your concern over the delays in redemptions, I
am taking a strong objection to being called a liar and the operator of
a Ponzi scheme.

I have forwarded all to your “copied” correspondences to our lawyers
here in Tokyo and we will be considering our position with regards to
your defamation and malicious statements on Monday.

We have repeatedly explained the true position of the funds as they have
traversed the global financial crisis and the presiding elements. You
are choosing to be unreasonable and deliberately damaging to our
reputation. You have been offered the opportunity to meet with me but
you have declined.

I would like to extend to you and any client the opportunity to meet
Monday or Tuesday to discuss openly the issues of concern to you.

Peter Drake

Martyn Terpilowski

—–Original Message—–
From: Martyn Terpilowski
Sent: 30 October 2009 16:29
To: ‘Heather C. McLeish’; ‘Lisa Darcy’
Cc: ‘Peter Drake’; [Martyn’s Colleague]; [Martyn’s Colleague]
Subject: RE: Now very, very worried

Hi Peter

How about 2pm on Monday then? Tuesday is a bank holiday here.

Ok maybe a Ponzi scheme is going a bit too far, but I can show emails saying
there were no redemption issues with MPF. I am 100% sure of that, so I am
unsure why it is at all defamation or malicious. Furthermore the question
was asked repeatedly due to worries we had and repeatedly we received the
same answer. It was also not brought up at meetings with yourself and
others, despite the question being raised. We only found out when Mr.
[XXXX] could not get his money out when he asked to redeem. I know I was
given false information, so I am not quite sure how that could be considered
malicious, but maybe your lawyer views it differently.

The information on MPF has certainly not been explained truthfully and I am
certainly not going to agree with you on that point.

Being told that ‘we can only pay out money, when money comes in’ – well I
will let you make your own opinion of that, but it is not a thing you should
have people at your company telling people, as obviously it is concerning. I
reiterate that most funds with redemption freezes (or whatever you choose to
call this) notify clients and brokers by letter and take no further money

This is unreasonable in no way Peter.

I have asked for information on the Regulator of your fund and yet to
receive it.

I declined the meeting originally, because for most of this year I have
asked questions and LM try to smooth things over, but I want to know the
reality, not what I have been told so far and as I said I have it in black
and white.

I feel let down as a big supporter of LM and I am sorry if that does not sit
well with you. This situation does not sit well with me at all, hence I am
now making a formal complaint, that you seem to think is unreasonable.





  1. Martyn is correct, this is just a ponzi scheme. What we need to know is how much was Drake paying himself and was he still paying himself whilst not paying anybody redemptions? Offering high commissions to get new money in to pay off current investors is exactly what a ponzi scheme is. It only goes on as long as new investors get suckered into parting with their money. Now the inevitable has happened and new investors have dried up, so the ponzi scheme goes belly up.

    Don't expect ASIC to do anything, they are are bunch of do-nothing empty suits who talk a lot but do nothing. When they finally act the money is long gone and evidence shredded. The punter is left wearing a barrel and penniless. You'd be better off keeping your money under the bed in a shoe box.

  2. Its good to know that at least one honest IFA out there was wise to the situation and did not sell more suckers up the river. Pity about his existing client, I know how that guy feels.
    Its sickening to know that so many other bottom feeding parasite IFAs continued to aid Drake in the Ponzi right to the end. They knew and yet kept reeling in more victims for their own greed and extra commissions.
    Its worse to know that those guys are still on the prowl around town, looking for new victims. Coming soon to an expat networking event near you.

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