Failed fund manager David Ross of Ross Asset Management appeared in the Wellington District Court today charged with running a $400 million Ponzi scheme by the Serious Fraud Office.
The Wellington-based financial adviser faces four charges of false accounting under the Crimes Act and one of theft by a person in a special relationship after the SFO completed a joint investigation with the Financial Markets Authority.
He appeared in court this morning and was remanded on bail until his next appearance on July 4, the FMA said in a statement on its website.
The white-collar crime investigator alleges large portions of Mr Ross's client portfolios were invested through a related broker Bevis Marks, with the value overstated by more than $380 million.
A Ponzi scheme is a money-go-round arrangement which uses cash from new investors to pay returns to existing members, who typically think they are reaping the rewards of an astute investment plan.
"The allegations made amount to serious criminal matters," acting chief executive Simon McArley says in a statement. "The joint activity between the SFO and FMA demonstrates that we can work effectively together to both address serious criminal offending and protect as far as possible the interests of the victims of that offending."
Third report released
The charges coincided with the release of a report on the third liquidation committee meeting by PwC's John Fisk. Investors and creditors are expected to receive a net $4.2 million as Mr Fisk liquidates the Ross Asset Management share portfolio, which is valued at $5.9 million.
Some $1.5 million had been realised as of yesterday, with a further $3.7 million to go and proprietary claims of $993,000.
Mr Fisk said it was not possible to give the fund manager a "definitive label as a Ponzi scheme" because while some transactions held those features, others suggested "a legitimate share trading business".
The liquidators have identified some investor transactions "where repayments have occurred which has resulted in the investor receiving significantly more than they had contributed" and are seeking legal advice on whether they can claw that back.
Mr Fisk said the liquidators are in discussions with Mr Ross and his wife with a view to reaching a settlement on the shareholders' current account, as that could provide a faster and better return than legal proceedings.
Ross Asset Management's assets were frozen and receivers appointed last year by the FMA after the watchdog received complaints about delayed or non-payment of investor funds.
Mr Ross was not available in the early days of the investigation after his hospitalisation under the Mental Health Act.
The SFO said today more than 1200 accounts had been affected by the scheme.
FMA head of enforcement Belinda Moffat says the agency will wrap up its investigation into Mr Ross's conduct under the Financial Advisers Act and plans to issue best practice guidance for advisers providing discretionary investment management services.