Russell Maher, pictured leaving the Auckland District Court in 2019, was sentenced to three years and four months in prison for fraud. Photo / Jason Oxenham
Russell Maher, pictured leaving the Auckland District Court in 2019, was sentenced to three years and four months in prison for fraud. Photo / Jason Oxenham
Victims of a foreign exchange broker who tried covering mounting losses by turning his business into a Ponzi scheme have - six years on - received a final payout of less than one cent in the dollar.
The final liquidators’ report for Russell Maher’s Forex Brokers was published this week,showing administrators PKF had wound up their handling of the company and noted 96 unsecured creditors owed $12.5 million - largely used-car dealers who had needed foreign currencies to pay for imports - would receive almost nothing.
“The liquidators made a first and final distribution to unsecured creditors of 0.36 cents in each dollar, totalling $44,920,” the report said.
Two staff owed $11,385 were repaid in full as preferential creditors, while liquidators themselves collected $316,099 in fees over the course of the six-year administration.
The Herald broke the news of troubles at the Queen St-based Forex Brokers in early 2017, and months later, the Serious Fraud Office (SFO) began an investigation culminating in Maher - the company’s founder and director - pleading guilty in 2019 to 47 charges of using forged documents.
One creditor, an automobile importer owed nearly $500,000, told the Herald he had worked with Forex Brokers since 2011, but several years into the business relationship was convinced by a Forex Brokers staff member to invest with the company.
“He told me, ‘We’ve got some investment opportunities, and Russell’s very clever and making healthy returns’,” he said.
The creditor said there were red flags he was “naive” to have ignored in hindsight, including not having any written contracts or any regular balance updates.
“I was doing it on trust. I feel like a f***ing idiot. You should be able to trust anybody you’ve been dealing with for years,” he said.
In 2020, Maher, now 55, was sentenced to a prison term of three years and four months.
Maher founded the company in 1995 and ran it from an office in Queen St’s Dingwall Building.
Before its collapse, the company’s website recorded Maher saying: “I have over 20 years’ experience in the foreign currency industry and will combine this experience with an extremely high level of business integrity and customer service.”
He initially told liquidators, “I had tried to devise a plan to start returning investor funds and start scaling back the company until I could close it down, but I ran out of time and cash flow,” but the SFO found - in claims later accepted in court - he had begun making investments with customer funds that were caught out in a 2014 collapse in value of the NZD.
To avoid crystalising these losses from 2015, Maher began doctoring financial documents - by cutting and pasting dates - to provide false assurances to clients that their requested currency orders and payments had been made.
In reality, he was pooling client funds, using new deposits to satisfy older orders, and unrealised losses were continuing to mount.
The SFO case to the court was that an “arrogant” Maher lied to maintain the facade of a successful business.
Russell Maher went to great lengths to maintain the facade of a successful business.
In accepting Maher’s guilty plea in 2020, Judge Noel Sainsbury warned him of the near-inevitability of a custodial sentence: “Prison doesn’t work, except perhaps for white-collar criminals.”
“Society is of the view, for the financial community, ‘pull your head in and lock up white-collar people’. Because I don’t think the meth dealers give a toss, it’s just a calculated risk of the job for them.”
Earlier liquidators’ reports said a $5m claim against the bankrupt estate of Maher had generated just $8286.
