Australians who poured their retirement savings into the failed First Guardian and Shield investment funds have received more bad news.

The government compensation scheme set up to repay victims of financial misconduct has been hit with a $170 million funding black hole, while liquidators revealed one of First Guardian’s biggest investments will likely be settled for only a fraction of its value.

The twin setbacks have raised concerns thousands of investors may never recover much of the estimated $1.2 billion wiped out when the First Guardian and Shield funds collapsed last year.

Liquidators this week asked the Federal Court to approve a deal allowing them to settle a $37 million loan owed to the fund by property company Western Subdivisions for just $2.9 million.

The loan had been one of First Guardian’s largest investments.

Liquidators Paul Harlond and Ross Blakely said they believed accepting the $2.9 million settlement was the best outcome after finding Western Subdivisions had virtually no assets left to repay the full $37 million debt. 

The proposed settlement is the latest sign investors are unlikely to recover significant amounts through the liquidation process.

In May, liquidators revealed they had clawed back just $3.7 million from the fund’s investments despite taking control more than a year ago.

Australians who poured their retirement savings into the failed First Guardian and Shield investment funds have received more bad news

Many investors have instead pinned their hopes on the government’s Compensation Scheme of Last Resort.

Introduced after the banking royal commission, the scheme was designed to compensate consumers when financial firms collapse or refuse to comply with determinations made by the Australian Financial Complaints Authority.

But new figures show the safety net is now under enormous strain.

The CSLR requires $190.3 million to fund financial advice claims but has collected only about $20 million through ASIC levies.

Much of the blowout has been driven by the sheer scale of claims stemming from the First Guardian and Shield collapses.

CSLR CEO David Berr said the government needs to raise $190.3 million to fund all financial advice claims.

‘Since November 2025, details have emerged relating to the potential size and scale of compensation required from the CSLR in relation to Shield and First Guardian Master Fund failures,’ Mr Berr said.

‘Consequently, the revised estimate now incorporates an allowance for claims relating to these products.’

David Anderson, 46, a director of the First Guardian fund, is accused by ASIC of siphoning millions of dollars into his personal ANZ bank account and shifting money overseas after the corporate regulator launched an investigation into his business affairs

Faced with a $170.3 million shortfall, the government is considering forcing more of the financial sector to foot the bill.

Assistant Treasurer Daniel Mulino has launched consultation on broadening the CSLR levy to include financial advisers and APRA-regulated super funds.

Thousands of First Guardian investors are still waiting to receive compensation despite winning their cases with AFCA, after the financial services licensee that authorised advisers to recommend the fund launched a legal challenge against the rulings.

ASIC alleges First Guardian director David Anderson, 46, siphoned millions of dollars from the fund into his personal ANZ bank account

ASIC also alleges Anderson moved $274million offshore after learning he was under investigation. 

Before the fund went under, he purchased a $9million mansion in Melbourne’s Hawthorn.

Fellow director Simon Selimaj, 63, had a $548,000 Lamborghini Urus registered in his name, which is alleged to have been bought using money from the fund.

None of the money sent offshore has been recovered.