Ross investors push for fidelity fund protection

David Ross was jailed for 10 years and 10 months for running a Ponzi scheme in which his investors lost $115 million when his business collapsed. Photo / Mark Mitchell

David Ross' out-of-pocket victims want an industry-backed fidelity fund to help "screwed" investors recover money from similar fraud and company failures.

The Ross Asset Management Investors Group - formed in the wake of that company's collapse - has written to the Commerce Minister Craig Foss criticising the "unfair and ineffective" regulatory environment in New Zealand.

Wellington-based Ross Asset Management, run by one of New Zealand's biggest fraudsters David Ross, cost investors around $115 million when it failed in November 2012. Investors are likely to get only a fraction of this back.

Ross, a financial adviser, ran a Ponzi-scheme through the Wellington business and disguised it by falsely reporting clients' investments.

His scheme reported false profits to investors of $351 million between June 2000 and September 2012 from the purported trading of fictitious securities.

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Despite Ross receiving record-setting 10 year 10 month jail sentence, the RAM investor group has expressed dissatisfaction with this prison term - a common sentiment found among victims of fraud.

The investor group, which copied Prime Minister John Key into its letter, said it was shocking that the finance industry did not "assist in unwinding messes like the RAM Ponzi".

"We are aware that the USA has had legislation in place for 44 years (the Securities Investor Protection Act 1970 or SIPA) which requires an industry fidelity fund to help unwind frauds and failures," the investors said in the letter.

Spokesman for the investor group, Bruce Tichbon, said similar laws should be put in place in New Zealand, setting up an industry-financed fidelity fund to "help protect screwed investors" and aid with recovery action.

"The problem is now dumped on the investors. With what little money is left they have to try fund recovery...what we haven't got is a proper ambulance at the bottom of the cliff," he said.

Elsewhere in the letter the investor group asked why there was no law in New Zealand to "reasonably unwind a Ponzi in a fair and just manner?"

"We have been informed by the liquidator that there is no NZ law that ensures victims can effectively reclaim a reasonable proportion of their money from those who received stolen money," the group said.

The group said there were "crippling problems" with unwinding Ross Asset Management and demanded Government action.

RAM's liquidators have long signalled they may try to claw back money from investors who received a payout from the company before it collapsed. John Fisk and David Bridgman have asked three investors to return $3.8 million. No agreement between the parties could be reached and the liquidators said in a report in July that it was anticipated legal action would be filed with the High Court.

The report also said any investor who has withdrawn money since December 2010 was placed on notice that the liquidators believe they may have a valid claim to recover the funds. This would be on the basis the investors received more than they otherwise would have during a liquidation.

See the full Ross investors' group letter to Commerce Minister Foss here: