Just $10 million of a "purported" $449 million of investor
funds under management by Ross Asset Management Ltd has been
identified by receivers, with the Financial Markets Authority
(FMA) saying there may only be "limited" remaining assets.
Receivers have raised questions whether the original
investment later became a Ponzi scheme, where some of any new
investors' cash is diverted to pay interest or dividends due
to earlier investors.
PricewaterhouseCoopers (PwC), receivers of Ross Asset
Management, yesterday called for liquidation of the Ross
Group, saying it was likely insolvent and unable to pay
investors what their portfolios were supposedly valued at.
"It is likely the historical returns advised to investors are
exaggerated and may possibly be fictitious," receiver John
Fisk said in a summary of PwC's first report, released
The Wellington investment firm, run by David Ross who has
been in hospital since the company was raided in early
November, has about 900 clients, but Otago financial sources,
who asked not to be identified, understand numerous
Queenstown people had been targeted with investment
So far the receivers had identified 1720 individual investor
accounts holding "purported" investments of $449.6 million,
but they, managers and expert advisers have only been able to
identify $10.21 million of investments held.
"In our [receivers'] opinion, the Investment Fund managed by
the Ross Group is insolvent, as it cannot repay the value of
the portfolios reported to investors as they become due in
the ordinary course of business," Mr Fisk said.
FMA chief executive Sean Hughes said yesterday that while he
welcomed the greater clarity the report brings on the affairs
of Ross Asset Management, it "clearly makes for difficult
reading for the 900-plus investors with funds under
Preliminary investigations also suggests $60 million more was
paid out by Ross to investors than was taken into his
investment funds over the past five years to September, with
a $24 million deficit of repayments to contributions in the
past year alone, BusinessDesk reported yesterday"The returns
to notified investors over the last 12-plus years would
appear to be unrealistic and in all likelihood aggregated or
falsified," their report says.
"The Ross Group is currently unable to return even a small
fraction of the reported value to investors."
Mr Ross, formerly a sharebroker, managed funds on behalf of
900 privately wealthy individuals.
A table in the 27-page report shows management fees averaging
$4.4 million a year were paid in each of the last three
years, and that fees had run at well above $1 million a year
The PwC investigation found inadequate record-keeping and has
been unable to source much of the documentary evidence for
trading and investment holdings that it needs to complete a
full picture of what looks to have the characteristics of a
Ponzi-style scheme, where investors were paid out at least in
part using other investors' funds.
"Withdrawals by investors during these periods (the last five
years), appear to have largely been funded by pooled funds
which include the contributions made by other investors,
coupled with the sale of investments," says the receivers'
"I think it's got characteristics of a Ponzi scheme. I don't
think it started out that way," Mr Fisk told BusinessDesk.
Among records found were some investments with lower values
than the original cost prices recorded by Ross, plus evidence
of trading losses on some shares, many of which appear to be
low-value and high-risk stocks.
The Ross group's database purports to show investments worth
$449.6 million, of which $152.4 million is said to be held in
Australian investments, another $136.1 million in Canada,
some $156.4 million in the US, $3.8 million in New Zealand,
and $943,332 elsewhere. Of this, some $437.6 million was held
by a Ross group subsidiary, Bevis Marks.
- Additional reporting: BusinessDesk