The High Court in Wellington has granted 426 investors in the Ross Asset Management (RAM) Ponzi scheme permission to pursue a multi-million-dollar lawsuit against New Zealand ANZ Bank. The investors lost a combined $115 million when David Ross, the manager of RAM, ran a Ponzi scheme that ANZ allegedly failed to prevent. The ruling, dated August 26, 2019, allows the investors to seek compensation for losses incurred between 2007 and 2012, when the scheme collapsed.
How the ponzi scheme worked
David Ross managed Ross Asset Management, which handled investments for 900 clients with a total of half a billion dollars in assets. The setup involved two accounts: a client account that received investor money for investment, and an operating account used for management fees and company expenses. When operating expenses exceeded the investors’ account, Ross withdrew funds from the client account to cover them. He then manipulated the books to show strong returns, but he was not investing the money where it should go. When investors tried to collect, the money was gone. Ross was convicted of fraud and sentenced to 10 years in jail.
ANZ’s role and the investors’ claim
The investors argue that ANZ failed to prevent the scheme despite clear warning signs. They claim the bank should have detected that Ross was moving money between accounts improperly. Instead, the bank allegedly hid the issue for three years by engaging in litigation to prevent the disclosure of documents. The Financial Markets Authority (FMA) eventually won a case against ANZ, forcing the bank to release documents showing its bungling management of RAM’s accounts. John Strahl, head of the RAM investors group, said the investors did not even know there was a court case about the disclosure until the ruling was released.
“We were kept in the dark about the bank’s actions,” Strahl said. “The court ruling now gives us a chance to hold ANZ accountable for its role in this disaster.”
The bank’s defense and the court’s decision
ANZ has argued that it was misled by David Ross and that it had no knowledge of the Ponzi scheme. The bank claims it acted in good faith and that Ross’s fraudulent activities were sophisticated enough to evade detection. However, the High Court ruling rejected this argument, finding that the bank had a duty to monitor the accounts and that its failure to do so contributed to the losses. The court’s decision allows the investors to proceed with their lawsuit, which seeks to recover at least some of the money lost.
“The bank’s argument that it was misled does not seem credible,” said a spokesperson for the investors’ legal team. “ANZ had the tools and the responsibility to stop this scheme, and it failed.”
The scale of the losses and the lawsuit
Of the 900 investors affected by the RAM Ponzi scheme, 426 have joined the lawsuit. That represents more than two-thirds of the affected clients, with more expected to join. The total amount lost by these investors is $115 million, though the full extent of the losses may be higher. The lawsuit aims to hold ANZ liable for breach of trust and negligence, and the investors hope to recover a significant portion of their money.
“We are determined to see this through,” Strahl said. “ANZ must be held responsible for its role in this tragedy.”
What happens next
The investors expect ANZ to fight the case vigorously. The bank is likely to argue that it was caught unaware of the RAM Ponzi scheme and that it should not be held liable for Ross’s criminal actions. However, the court’s ruling has given the investors a strong legal basis to proceed. The case will now move to a full trial, where evidence will be presented on ANZ’s handling of the accounts and its knowledge of the scheme.
The ruling is a significant victory for the investors, who have been fighting for years to recover their losses. It also sends a message to banks that they have a duty to monitor accounts and prevent fraud, even when the fraud is perpetrated by a trusted money manager.
The investors have waited a long time for this chance. Now they can finally pursue justice against a bank they believe failed them. The outcome of the trial will determine whether ANZ will be forced to compensate the victims of one of New Zealand’s largest Ponzi schemes.
