Liquidators eye $954k clawback from investor in Ponzi scheme
Liquidators of the Ross Asset Management group of companies, found to be a Ponzi scheme, are looking to claw back $954,000 one investor withdrew before the scheme collapsed, in the first of three test cases.
PwC’s John Fisk, represented by lawyer Mike Colson, says liquidators have a claim on any funds withdrawn from the investment scheme since December 2010 under the Companies Act on the basis investors would receive more than their entitlement under a liquidation. The liquidators also believe they can make a claim on anyone who withdrew funds within the past six years under the Property Law Act on the basis they were part of David Ross’ fraud.
In the first of the test cases to claw back up to $3.8 million that was withdrawn from the scheme, Justice Alan Mackenzie in the High Court at Wellington heard that the respondent, who has interim name suppression, withdrew $954,000 from the RAM group in 2011.
The respondent had originally invested $500,000 in November 2007 and the total returned includes “profit” on the investment.
Colson argues that because a Ponzi scheme relies on new investors putting money in to repay older investors and prolong the fraud, any repayment made belongs to the collective group of defrauded investors.
At present, defrauded Ross Asset Management investors expected to receive 3c in every dollar invested and the claw-back of $954,000 would lift this to 4c in the dollar, Colson said.
Wellington-based David Ross built up a private investment service by word of mouth, producing regular reports for shareholders indicating healthy but fictitious returns.
Between June 2000 and September 2012, Ross reported false profits of $351 million from fictitious securities trading as part of a fraud that was the largest single such crime committed by an individual in New Zealand.
Last June the Court of Appeal turned down a bid by Ross to reduce his 10-year, 10-month jail term, which carries a minimum non-parole period of five years and five months.
Fisk is seeking to claw back some of the $100 million to $115 million that was lost in the fraudulent scheme for about 1200 investors. At June 16, they estimated the realisable value of shares held by Ross Asset Management entities to be about $5.4 million, with estimated total realisations available for investors and creditors of $3.98 million.
Ross Asset Management’s assets were frozen and receivers appointed in 2012 by the Financial Markets Authority after the watchdog received complaints about delayed or non-payment of investor funds.
Ross was not available in the early days of the investigation because of his hospitalisation under the Mental Health Act.
PwC’s Fisk and David Bridgman were appointed to preserve the assets of the Ross family and related trusts as part of the wider investigation into Ross Asset Management. The hearing continues.