Michael Grochowski orchestrated a network of Victorian land banking companies that raised approximately $24 million from investors before the entire structure collapsed into liquidation, leaving hundreds of investors with worthless options on land that never existed in the companies’ portfolios.
The Federal Court disqualified Grochowski from managing corporations for five and a half years in January 2019, finding he had operated as a shadow director while deliberately concealing his control from investors who believed they were purchasing stakes in legitimate property developments on Melbourne’s outskirts.
The Shadow Director Behind the Facade
Michael Stephen Grochowski carefully structured his operations to avoid official directorship while maintaining complete control over the money flow. Though he wasn’t a named director of Bilkurra Investments and Foscari Holdings, the Federal Court determined he functioned as an officer of both companies until their wind-up in April 2016, with ASIC’s investigation revealing that all bank accounts were operated through Project Management (Aust) Pty Ltd under his direct control.
His co-director Ian Edward Stephens, an experienced chartered accountant, was brought in specifically to provide what the Court later called a “false facade of meaningful oversight and governance.” Stephens was appointed director in October 2014 when Grochowski needed to “improve the companies’ accounting practices to impress potential investors” ahead of a planned listing.
Despite his credentials, Ian Stephens failed to exercise any meaningful decision-making responsibility and ultimately received a four-year disqualification for his role in the deception.
The elaborate corporate network spanned multiple Victorian locations, with the Hermitage Bendigo scheme operating at Midland Highway in Bagshot, the Foscari scheme at 99 Palmers Road in Truganina, and the Veneziane scheme at Brooklyn Park Drive in Brookfield.
By the time ASIC moved to shut down the operation, five companies were wound up in July 2018: Brookfield Riverside, Bilkurra West, Bilkurra South, Gillies Road, and Project Management (Aust). An earlier related entity, Midland Hwy Pty Ltd, had already been wound up in December 2015, suggesting a pattern of corporate collapses.
How the Options Trap Worked
The scheme’s brilliance lay in its exploitation of a critical regulatory gap that distinguished options from actual property sales. Development companies raised over $15 million by selling options to purchase land or off-the-plan contracts for developments that existed only on glossy brochures. The devastating truth, as ASIC’s investigation uncovered, was that the development companies never owned the land they were selling options on.
The parliamentary inquiry into land banking revealed the sophisticated deception at work: investors genuinely believed they were purchasing stakes in future residential developments, unaware they were merely buying options to exercise a future purchase with no claim on any physical asset. Many discovered too late that even if the opportunity to exercise their options had arisen, they lacked the funds to complete the purchase—a fact the salespeople likely knew when targeting them.
Unlike conventional land sales which must be held in trust, companies selling options operated in a regulatory blind spot that allowed them to treat investor money as general revenue. This meant Grochowski’s companies could legally spend investor funds on operational expenses, hefty sales commissions, and transfers between related entities while the promised developments remained permanently stalled. When ASIC found that attempts to purchase the underlying land had failed, it became clear the developments were never intended to proceed.
A Pattern of Regulatory Defiance
Grochowski’s land banking operation wasn’t his first encounter with financial regulators. ASIC had already prohibited him from providing financial services for four years in April 2012 following earlier misconduct. Rather than serving as a deterrent, this ban merely prompted Grochowski to pivot from regulated financial services to the murkier world of property investment, where oversight was fragmented between state and federal authorities.
The fragmented regulatory system created the perfect environment for operators like Grochowski to resurface. While banned from financial services, nothing prevented him from selling property options through high-pressure seminars marketed as wealth education. This regulatory arbitrage would later prompt the parliamentary committee to recommend comprehensive reforms to close these dangerous gaps.
The High-Pressure Marketing Machine
The parliamentary inquiry exposed the predatory marketing tactics that drove investors into these schemes. Operating through “wealth education” seminars similar to Jamie McIntyre’s 21st Century Group, Grochowski’s network employed a well-tested playbook. Spruikers earned substantial commissions regardless of investor outcomes, creating powerful incentives to close deals at any cost.
These seminars carefully orchestrated an atmosphere of exclusivity and urgency, making attendees feel they were receiving privileged access to opportunities “too good to miss.” Celebrity endorsements and fabricated testimonials from supposedly successful investors added credibility to the pitch. The promotional materials, as the inquiry found, “wilfully underplayed risk and deceptively overstated the anticipated benefits and commercial robustness” of the schemes.
The targeting was deliberate and cruel—focusing on inexperienced investors with limited funds and poor financial literacy. Many were encouraged to use their self-managed superannuation funds, effectively gambling their retirement savings on worthless options. The parallels to other schemes were striking: Jamie McIntyre’s operations had promoted five schemes to over 100 investors before the McIntyre brothers received 10-year bans, with Justice Bromwich calling them “completely financially incompetent” after $7 million vanished with “little prospect of reimbursement.”
The Money Trail Goes Cold
ASIC’s investigation painted a damning picture of systematic asset stripping. Investor funds moved between companies “without any apparent concern for obligations” owed to those who had provided the money. The Federal Court found that Grochowski maintained “day-to-day control of the companies, including control of bank accounts which contained investor funds,” yet when liquidators were finally appointed, the majority of the $24 million had simply vanished.
The human cost extended far beyond balance sheets. Retirees lost life savings, young families saw house deposits evaporate, and self-funded retirees watched their superannuation disappear into a maze of inter-company transfers. With the companies in liquidation and funds dissipated, recovery prospects remain essentially nil. Those holding options saw them expire worthless, while others discovered their “investments” were in undeveloped land on Melbourne’s fringes that the companies never actually owned.
Regulatory Reform Too Late for Victims
The Victorian land banking collapse became a catalyst for overdue regulatory reform. The parliamentary committee’s investigation revealed how property investment advice had operated for decades in a dangerous grey zone between state consumer protection laws and federal financial services regulation. Their final report specifically named 21st Century Group and Market First alongside Grochowski’s entities as companies that had engaged in “practices prejudicial to investors’ interests.”
The committee’s recommendations were comprehensive: bring property investment advice under Commonwealth regulation, require advisers to hold Australian Financial Services Licences, establish minimum qualifications and codes of conduct, and crucially, require that money paid for options be held in trust like conventional property deposits. These reforms, if implemented earlier, might have prevented Grochowski’s scheme from ever taking root.
ASIC Commissioner John Price promised that “these bannings will help protect the public from further investing with officers of companies that repeatedly fail,” while ASIC provided Assetless Administration Fund support to help liquidators investigate where the money went. Yet enforcement remains problematic as operators simply resurface under new names, exploiting the same regulatory gaps with slightly different schemes.
Conclusion
Michael Grochowski was prohibited from managing corporations until mid-2024, while Ian Stephens’s ban expired in 2023. Nicholas Martin and Andrew Sallway of BDO continue their work as liquidators, though meaningful recovery appears impossible.
The $24 million Victorian collapse stands alongside the McIntyre schemes and Market First operations as stark warnings about the dangers of unregulated property investment schemes.
For the hundreds of investors caught in Grochowski’s web, the Federal Court’s disqualification orders provide cold comfort. Their money is gone, their trust shattered, and their futures altered by a scheme that exploited every weakness in Australia’s property investment regulations.
The tragedy is that Grochowski’s operation was neither unique nor unprecedented—it was simply another iteration of a familiar scam that continues to resurface wherever regulatory gaps allow predators to operate.
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