About 700 investors were owed $115m when Ross Asset Management collapsed in 2012. Now a group of them is going after ANZ Bank, saying it either knew or should have known that Wellington financial adviser David Ross was running a Ponzi scheme.
Ross was sentenced to 10 years and 10 months in jail after admitting the fraud, which overstated client funds by $380 million. The firm’s collapse was one of the biggest in the funds management industry. It worked by using money from new investors to pay out others instead of investing it. Liquidators have since moved to claw back money from investors who left early with large gains.
What the investors allege
The group’s central complaint is about how the money was held. Under the law, client funds were meant to sit in separate accounts. The investors say ANZ never required that, and let deposits be used for other purposes.
“The ANZ did not require this and allowed the funds being deposited to be used for non-investment purposes, including paying RAM expenses, reducing RAM’s unauthorised overdraft with ANZ and also to repay other investors,” the group said.
The turning point came through the Financial Markets Authority (FMA), which investigated the collapse. In April, the Supreme Court dismissed an ANZ move to stop the regulator passing information to investors. The FMA’s investigation concluded that the bank might be open to legal action.
John Strahl, the group’s spokesperson, said the investors then got their own analysis and legal advice. “This confirms that we have a very good claim against ANZ and we are now proceeding with legal action,” he said.
The regulator and the funding
FMA chief executive Rob Everett said the authority had done its job by getting the investors to the point where they could sue. “This matter raises important questions around bankers’ duties and we are pleased they will now be tested in the court,” he said.
LPF Group, a firm specialising in class actions, is funding the case on a no-win no fees basis. The group said more than 200 people had signed up.
