It was a starry event that lured some of the biggest names in Hollywood along with a sprinkling of the Muscovite elite. There was Woody Allen, playing with his jazz band after a performance by Andrea Bocelli.

There were Francis Ford Coppola and Jeremy Irons, Orlando Bloom and Steven Seagal, Sophia Loren and Dionne Warwick, all gathered in the leafy heights of southern Moscow for a charity gala like no other: this charity does not dispense its largesse.

The Federation Fund, which has presented itself as a children's charity since forming late last year, has rapidly turned into one of the most controversial operations in a country known for opaque projects. This weekend, after weeks of billboard advertising splashed across the capital, it laid on a lavish two-day show in aid of … Well, it was not entirely clear what the event was in aid of.

The charity says it is no longer about raising funds, but raising awareness. Some of the guests said they had been paid to attend.

Doubts about the Federation Fund surfaced soon after an inaugural concert in St Petersburg this year shot it to prominence, thanks largely to Vladimir Putin's notorious version of Blueberry Hill, which became an internet hit.

Three months after that show, the mother of a sick child wrote an open letter to the president, Dmitry Medvedev, complaining that hospitals promised donations had received nothing. The fund moved quickly to donate medical equipment to several hospitals, and then denied any wrongdoing, saying it had been set up to generate publicity, not cash.

Most of the stars at the weekend event had heard nothing of the questions about the event and at least one, Kevin Costner, came back for a repeat performance after appearing at the first in December.

The actor Chris Noth, best known for playing Mr Big in Sex and the City, admitted he was being paid to attend the event. "Yeah, they pay you a fee, a nominal fee," Noth told the Guardian.

The founder of the charity, Vladimir Kiselyov, a Soviet-era rock star, said he paid for the event out of his own pocket, while receiving ad space and the concert site free of charge. His idea, he said, was to put donors directly in touch with recipients of their generosity, obviating the need for fundraising.

But that did not explain the purpose behind the weekend event, which was not without an awkward moment or two. Co-host Yelena Sever, a relative unknown recently put forward as the fund's "patroness", awkwardly introduced Bocelli to two blind Russian girls who performed at the event, which the fund presented as a means of raising "awareness" of children with cancer and sight problems.

"Nice to see you," she told the girls, unfortunately, before corralling a confused Bocelli into giving them a white teddy bear.

At least two men whose faces adorned the billboards around Moscow – Dustin Hoffman and Larry King – dropped out after queries about their participation from the Russian media. Anna Zaitseva, a local agent with Platinum Rye Entertainment, said both men had fallen ill.

The Russian government's blessing came in the form of the culture minister, Alexander Avdeyev, who took to the stage to praise the fund for bringing attention to the country's sick children. Russian riot and traffic police provided security.

By the intermission, questions had begun to spread among the celebrity guests. When asked why he thought he had been invited, Irons said: "It's a concert raising the profile of the foundation to provide equipment to paediatric hospitals," before quickly adding, "Is that accurate?"

By Monday morning, the fund found itself at the centre of more controversy. The parents of Dasha Zvonareva, a young girl who died of cancer in March, accused the fund of using her image without permission.

"What we saw was a huge blow to us," they told Kommersant online, saying their daughter's image was used in a promotional video aired at the concert on Saturday.

"We want to know why Dasha's photo is in the video. Where could they have taken it? How dare they take it, who allowed it?"