Sharechat Logo

Faafoi seeks feedback on new Ponzi scheme laws as victims left out of pocket

Thursday 10th May 2018

Text too small?

The government wants public input on the laws surrounding Ponzi schemes, with current legislation to recover investors' funds not designed to deal with the scams meaning victims are left out of pocket.

 

Commerce and Consumer Affairs Minister Kris Faafoi said public consultation on a new regime begins today and will run until July 6. A Ponzi scheme is a fraudulent investment scheme where investors are paid false profits from the amounts invested by new investors.

 

Currently, there is no specific law to recover lost funds through a Ponzi scheme, so a combination of the insolvency regime in the Companies Act and the prejudicial dispositions regime in the Property Law Act is used. There's concern that future courts might not allow these approaches after recent court decisions, with uncertainty about the proper application of the law.

 

The legal uncertainty also results in higher costs for liquidators from trying to clarify how the insolvency regime can be applied, reducing the amount able to be distributed to investors, and delays in distributing funds, according to the discussion paper released by the Ministry of Business, Innovation and Employment today.

 

Faafoi said it's difficult to deal with Ponzi schemes, with challenges around deciding whether a scheme is a Ponzi scheme, and how to treat different investors.

 

Currently, distinctions are made between investors by liquidators based on whether investors could withdraw funds before the scheme collapsed, whether withdrawn funds can be clawed back, and whether investors can claim any specific assets, MBIE said.

 

"These differences should not be relevant to the sharing of losses between investors in a Ponzi scheme," MBIE said. "In most instances, they reflect differences in timing – they do not suggest that any investor is more blameworthy or should bear a greater share of losses for any other reason."

 

Earlier this week, a Ross Asset Management Investors Group spokesperson criticised the sentence handed down to David Ross, who ran New Zealand's biggest ever Ponzi scheme which collapsed in 2012, and said the case was proof that new legislation should be put before parliament. 

 

Ross was jailed for 10 years and 10 months with a non-parole period of 5 years and 5 months in 2013 for defrauding investors of between $100 million and $115 million of investor funds. Many victims have still not received any payout from the liquidation. 

 

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Unfair business practices on borrowed time
New director of Vital Healthcare’s manager unfazed by fire-at-will clause
QMS pulls out A$35M from NZ unit in MediaWorks merger
Take care to avoid
Is this the calm before a storm of credit card thrashing?
Shrinking meat and dairy product manufacturing weighs on growth outlook
Jon Macdonald to stay on as Trade Me boss through takeover tussle
Shareholders’ Association wants Finzsoft to come clean
A2 rings in more executive changes under new CEO Hrdlicka
NZ dollar dips as China-US trade tensions cast pall over global markets

IRG See IRG research reports