The businesses were placed into liquidation by the High Court at the end of August.
It came after an investigation by the Serious Fraud Office, as a result of information supplied by the Financial Markets Authority.
The companies owe more than $12.5 million.
The Official Assignee, in its first liquidators’ report, said it was not practicable to estimate how long the process could take and it was in the early stages of administration of the liquidations of Financial Planning Ltd, which traded as Breathe Financial, and Impact Enterprises Ltd.
Breathe Financial was a registered financial provider whose clients were advised on an investment plan by Kloogh, the liquidators noted.
Most of the investors had the purchase of their investment and subsequent reporting arranged via a wrap platform, which should have meant that none of their money passed through the adviser or his business.
But the liquidator said the evidence was the companies operated as a Ponzi scheme controlled by Kloogh, in which money from new investors was used to pay existing ones.
“The liquidator will need to review and verify the purchase of each investment currently showing as a custody asset. Initial sample investigations have shown that the actual funds provided by one investor may have been used for other purposes (eg to repay earlier investors), or co-mingled with other funds.
“For each investor, an investment that appears in the records in their name, may actually be purchased with another investor’s funds or a mixture of investors’ funds. The scale of co-mingling and funds misapplied is not known at this stage and will be the subject of investigation. This will involve the liquidator having to assess hundreds, potentially thousands of transactions to verify claims by investors to assets currently held with the custodian on trust.”
The liquidators have already been given records for a “substantial number” of investors and banking records for companies going back to 2012.
The custodian and wrap platform have been placed on notice that they should not pay out any of the custody assets pending an investigation by the liquidator.
A tracing exercise will be undertaken to determine whether funds paid by an individual investor were ultimately used to purchase a custody asset for that investor.
“The liquidator is proceeding on the assumption that Mr Kloogh has withheld the true situation from many of his clients. The liquidator anticipates that any reports and documents provided to these clients therefore are unlikely to be a true reflection of their investments. The liquidator is also investigating potential claims against the director, Barry Kloogh. We are aware that the SFO has a current investigation into the activities of Mr Kloogh. The liquidator cannot comment further on this aspect.”
Potential assets included furniture and fixtures, which were recorded as being of low value, trail commission, which the liquidator is reviewing with a view to selling, a car that has already been repossessed and insolvent transactions or funds obtained by Kloogh.
The liquidator is investigating what happened to funds paid out of the company accounts and is aware of property held in trust associated with Mr Kloogh. The liquidator will ascertain whether company funds have contributed to this asset and will investigate any claims subsequently arising.”
A creditors’ meeting is scheduled for November 25.
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