"Where there is a need to step in and protect students, NZQA will continue to take action.
"By far the majority of PTEs [private training establishments] are delivering quality education outcomes for students, but those that do not comply will be held accountable and NZQA makes no apologies for that."
Ellipse's lawyer, Evgeny Orlov, said the decision was a travesty of justice, as the money was taken out for cashflow purposes but was covered by an insurance company, which in a clerical glitch had failed to confirm the arrangement in writing.
NZQA knew this but decided to close the school anyway.
"The powers they have exercised are draconian and wrong," Mr Orlov said. "We are filing judicial review proceedings against them ... We're going to sue NZQA for the damages they've caused to the school."
He said Ellipse had previously complained about racial comments made by an NZQA reviewer against the Indian-run school.
NZQA previously blocked all new enrolments at Ellipse because of concerns that its results might not be genuine and Immigration NZ stopped issuing visas for students to attend the school.
An NZQA report on the school last November found it used a beauty services tutor to teach physiology and anatomy to healthcare students who were about to look after elderly people in rest homes.
It said the school also transferred computing students to a higher-level course, which they were almost bound to fail, when their original course was not approved.
Meanwhile, students at Oxford International Academies (OIA), which collapsed two weeks ago, say they have been unable to continue their studies because other schools will not accept their work.
Harinderjit Singh said he and about 15 others paid OIA about $6000 for a New Zealand Institute of Management diploma, which began in March and was due to finish in November.
When the school went into voluntary liquidation, he received a partial refund of $3600 based on the amount of the course he had completed, which NZQA said he could take to an approved school on a list it supplied.
Mr Singh said he had tried four of the schools and all insisted on him paying $6000 to $7000 to do the whole course again.
NZQA said the students' work was not recognised because OIA had not been allowed to mark its own students' work since December.
It would take several weeks for other schools to complete this marking. Similar delays could affect the Ellipse students.
TROUBLED INSTITUTIONS
Ellipse Institute
Deregistered this week for repeatedly failing to keep student fees in its trust account. The school says it will sue the NZ Qualifications Authority.
Kingsland Institute
Two senior staff charged with immigration fraud in 2010.
API Institute of Education
More than 150 international students gained fraudulent qualifications in less than a year until staff blew the whistle.
NZ Institute of Choice
Closed in May last year for repeatedly failing to keep student fees in its trust account.
NZ Academy of Studies
Forced to close in 2009 after it was caught selling a business diploma for $12,000.
Ivy College
Closed down last August after NZQA expressed a lack of confidence in its qualifications.
Oxford International Academy
Placed in voluntary liquidation two weeks ago after NZQA expressed no confidence in the school in December.
