Ponzi investor stung with $100k interest bill

Fraudster David Ross. Picture / Mark Mitchell

An investor in a ponzi scheme must pay back more than $100,000 in interest on top of the $450,000 already ordered to go back to the liquidators of fraudster David Ross' collapsed company.

In May the Supreme Court ruled that former Ross Asset Management investor Hamish McIntosh can keep the $500,000 he invested with the failed ponzi scheme that but must return $454,047 in the fictitious profits from it.

McIntosh, a Wellington lawyer who represented himself, invested $500,000 in RAM in April 2007 and gave notice in September 2011 that he wished to withdraw his funds.

He was repaid $954,047 including returns of $454,047 that were actually funds syphoned from other investors' deposits in what transpired to be New Zealand's biggest ponzi scheme, with investors' funds misappropriated almost immediately and used to repay investors wishing to withdraw their funds plus the fictitious returns. Principal David Ross, who is currently serving a 10 year, 10 month jail sentence, also used the funds to pay RAM's operating expenses and fund his own drawings.

The respondents were liquidators John Fisk and David Bridgman of PwC, who took their action against McIntosh as a test case and had previously said they would pursue other investors who pulled out their funds before RAM's collapse.

In May, the Supreme Court ruling by a majority of Justices Terence Arnold, Mark O'Regan, Ellen France and William Young upheld the judgments of the lower courts while disallowing a cross-appeal by the respondents that the principal should also be repaid.

The High Court had ruled the fictitious profits must be forfeited as had the Court of Appeal. Justice Susan Glazebrook issued a dissenting judgment that would have allowed the cross-appeal and required the full $954,047 to be repaid.

The question of interest could not be decided upon between the parties and yesterday the Supreme Court said that McIntosh was to pay interest of 5 per cent per year on the $454,048. It was payable from the time which RAM went into liquidators in December 2012.

That works out to be around $22,700 a year and brings McIntosh's interest bill to over $100,000.

McIntosh did not want to comment this morning.

RAM was placed in receivership in November 2012 and in liquidation in December 2012. The respondents were appointed first as receivers and then as liquidators.

- with Businessdesk