A New Zealand man called New Zealand's "Madoff" has pleaded guilty to masterminding a massive Ponzi scheme that took in nearly $300 million from investors and is believed to be the country's largest Ponzi scheme. David Ross, 63, appeared in court today to plead guilty to five charges of false accounting and theft. Ross, who was previously hospitalized in November for treatment under New Zealand's Mental Health Act, had been free on bail with a court-imposed allowance of $1,000 per week.
Ross was the director of Ross Asset Management ("RAM"), which he used along with numerous associated entities to solicit investors with the promise of guaranteed and lucrative returns - including annual returns of up to nearly 40%. Investors received regular returns, and Ross was generally perceived as an astute investor. However, in late 2012, many investors began complaining about delays in scheduled payments, and in November 2012, authorities from New Zealand's Financial Markets Authority raided RAM's offices.
After a Receiver was appointed to sort out RAM's finances, a preliminary investigation showed that while RAM reported investments of nearly $450 million to nearly 1,000 investors, only $10 million remained in RAM's accounts. The Receiver, John Fisk, estimated that RAM took in over $300 million since 2000, keeping nearly $30 million kept as management fees while $290 million was withdrawn or paid to investors. Fisk also found that the fund was insolvent since 2007 - that is, fund outflows exceeded new investor inflows, sometimes by $60 million. When authorities raised RAM's offices in November, the scheme was on the verge of collapse.
Ross will remain jailed until his sentencing in October. Each false accounting charges carries a maximum sentence of ten years, while the fraud charge carries a maximum seven-year term.