Online broker Halifax shut down with 12,000 investors’ money.
The company used client money to cover its own losses.
There’s now a $19.7 million shortfall of investor funds.
Liquidation and court order is the only way customers and creditors will get any money back – and that could take over a year.
Customers of collapsed broker Halifax Investment Services will be $20 million out of pocket after the company used investment money to cover its own losses.
Halifax brought in administrator Ferrier Hodgson back in November, who immediately froze $211 million of client investments and started a painstaking investigation into the financial situation.
The latest update to creditors this week has revealed the company is short $19.7 million of investor funds, with a damning explanation for the gaping hole.
“The primary cause of the deficiency appears to be use of client monies to fund operating losses since at least January 2017,” said Ferrier Hodgson.
“The management accounts, audited accounts and lodgements with ASIC all appear to present with accounting irregularities.”
The amount lost represents about 9 per cent of investors’ money.
Ferrier Hodgson said it was co-operating with corporate regulator ASIC during its investigations and reported there seems to be violations of the Corporations Act in the way Halifax syphoned investment money to cover its own operational losses.
The administrators will recommend liquidation as the only remaining option for Halifax.
Also of concern is the “co-mingling” of investor money, with customer capital invested in one product transferred to others in an attempt to cover up losses.
This mixing of client funds has made it impossible to trace back investor deposits as there is “no pattern behind the transfer of funds between client accounts” and Halifax executed the transfers on a “as needs” basis.
A court order after liquidation will be the only way creditors and 12,000 investors will be paid out – and that could take about a year, if not longer.
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