The former home of LM Investment Management founder Peter Drake.
During the boom, it was valued at $37 million. Earlier this year, it was listed to sell for $20 million. On Sunday, Peter Drake's four-storey mansion on the Gold Coast fetched just $7.35 million at auction.
The luxurious Mermaid Beach digs are mortgaged to ANZ, so Drake's 12,000 investors, whose savings were frozen when LM Investment Management collapsed in March, are unlikely to enjoy the proceeds. Indeed their prospects for any meaningful return are diminishing, depending on the fund they are in - as are the chances of clawing back any of the $46 million which the Kiwi entrepreneur borrowed from LM before its collapse. Much of it went offshore, including a $16.9 million loan to a company controlled by Mr Drake in Hong Kong.
They can take comfort, however, in the move by the Australian Securities and Investments Commission to freeze Mr Drake's assets and seize his passport.
Gold Coast businessman Peter Drake.
The Supreme Court of Queensland ordered the entrepreneur to surrender his passport on Friday following an application by ASIC. The regulator will continue to investigate as outrage grows over the unravelling mortgage empire.
Meanwhile, evidence has emerged of LM enticing new investors into its Managed Performance Fund by providing large commissions for financial advisers although it was refusing to make redemptions for investors who wanted out.
A financial adviser in Hong Kong, Martyn Terpilowski, told BusinessDay he had been trying to get his clients' money out before the collapse and had warned other advisers not to accept the 9 per cent upfront commissions offered by LM ($90,000 in commission upfront for advisers who put $1 million of their clients' savings into the MPF). They ignored his pleas.
Mr Terpilowski described his advisory peers as disgraceful for putting clients into LM's funds when they ought to have known the funds were in trouble.
His claims are corroborated by emails sent to industry colleagues and to Mr Drake and LM salesman Martin Venier.
''It was getting more and more worrying and LM just stepped up their sales and offered all the brokers crazy commissions,'' Mr Terpilowski told BusinessDay.
''Friends Provident and Royal Skandia [two of LM's biggest clients] did not stop taking the MPF until one week before it went into administration - when they knew the way it was going.''
Friends Provident declined to respond to questions and a spokesman for Royal Skandia said it was the advisers themselves rather than Royal Skandia that received commissions.
''Royal Skandia was advised on March 6, 2013, that, despite a small delay in redemption payments due to unusually extreme and unexpected movements in foreign currencies, the LM Managed Performance Fund remained sound and capable of making payments,'' the spokesman said. ''MPF was removed as an investment option on March 19 when we were informed that LMIM would be placed into administration.''
Mr Terpilowski said: ''Nine per cent commission is totally insane and an indication that things would go wrong. I was trying to get my clients' money out all this time and was just getting the same excuses.''
He had worked as an investment adviser in Asia for nearly 15 years, mainly in Japan, and has recently moved to Hong Kong.
Before the financial crisis in 2008, he had put some client money in LM funds and he visited the company's office in Surfers Paradise. ''I was quite happy with what they were doing, at first,'' he said. ''After 2009 and the global financial crisis, things started to change and by 2010-11 things had changed dramatically. As other funds in the real estate space closed to both subscriptions and redemptions - to protect existing investors from potential fire sales of the underlying portfolio - LM just stepped up their sales machine, particularly with the LM Managed Performance Fund. When we asked them at the time if there was any problem with redemptions [as there was with many other funds in the sector at time] they said, no, not at all.''
Mr Drake was unavailable for comment and Mr Venier did not respond to emails. Mr Drake is suing Fairfax Media and the author of this story for defamation.