A claim over shares held by Ross Asset Management could determine how those who lost money in the firm's collapse try to claw back their losses back, says an expert.
Ross Asset Management was put into receivership late last year by regulators after investors were unable to access their funds or reach the firm's sole director, David Ross.
An investigation by receiver PricewaterhouseCoopers into the fund, purportedly worth $450 million before it folded, found just under $11m in assets - much of it in shares.
Those shares are subject to a proprietary claim, with a group of Ross Asset Management investors claiming they own the assets, which David Ross was holding on their behalf.
Iain Thain, a partner at DLA Phillips, said if they were successful it could be used as grounds for the wider investor group to claim Ross merely managed their funds in trust as opposed to investors buying into Ross Asset Management funds.
That would suggest David Ross used money that did not belong to him to pay out the capital, plus fictional profits, to investors who left the scheme before its collapse - a hallmark of a classic Ponzi scheme.
Receivers have yet to rule whether Ross Asset Management was a Ponzi scheme or not.
"If the company took and held investors' money ‘on trust' for them, and if that can be proven, then there is a strong argument for a proprietary remedy and perhaps clawback," Thain said.
Thain previously advised the receivers of Goldcorp, which collapsed in the late 1980s owing investors more gold bullion than it held in its vaults at the time. The case had "similarities" with Ross Asset Management, he said.
He said should the proprietary claim fail, it is likely investors would be regarded as unsecured creditors of Ross Asset Management, which still allows for some repatriation albeit with more complications.
According to the Companies Act, liquidators can reverse any payment made to creditors within a two-year period of the collapse that prejudices other creditors under voidable insolvency transaction powers.
The receivers' report shows $67.2m was withdrawn from Ross Asset Management in 2011 and 2012, about 40 per cent of the funds taken out since 2008, when withdrawals exceeded contributions for the first time.
However, investors who profitably exited the scheme can challenge the process provided they withdrew their money in good faith, and changed the position of the funds, such as by buying a house.
Notably, investors who exited but haven't changed position can still have payments voided.
"It leads to perverse results, where a person who gets paid out and puts it in a bank has to pay back, while a person who went to Europe on a trip and blew the lot doesn't," Thain said.
He added the perceived unfairness of the process was why liquidators often do not pursue clawback from investors using voidable transaction powers.
At this stage little is known about how PWC will pursue the case, but receiver John Fisk previously said receivers may look to establish a test case to leave the door open for clawback and to keep legal costs to a minimum.