David Ross "emptied out" many Manawatu farmers who invested with him, attracted by high returns of more than 20 per cent a year and "greed", according to a source in the Wellington investment sector.
Investors are thought to include Wanganui Collegiate and Christ's College old boys.
But Ross also had money from investors in Canterbury, Queenstown and even Australia.
Until recently it was not apparent just how much money he had taken in - hundreds of millions, with just $10m in shares left.
"He must have gone off the rails and started punting hard on the nose on the last race, and the horse came in last," the source said.
But Ross wasn't acting with a prospectus, there was no audit and no custodian.
"Nothing," the source said.
The source doubted that the investments had just turned sour this year, given the drop in mining stocks in recent years.
Investors were initially attracted by the high returns Ross reported, of more than 20 per cent a year.
"The better the return you offer, the less people want to know about it. Greed [was the reason]."
The collapse would cast a chill over the market and likely see greater regulation and more compliance checks and costs, which would in turn reduce returns for investors.
Ross had invested heavily in high-risk small Australian and Canadian mining stocks for hundreds of investors and was earlier seen as "quite canny and good at small stocks".
"Some people put in small amounts, which was the right way, but some put the farm in," the source said.
Ross was a regular at gold mining industry conferences in Australia.
"We were surprised how good performance was in the last five years given that he was in resource and mining stocks, which were not going very well," the source said.
The Financial Markets Authority was looking at advisers to see if they were practicing properly, but had not reached the point of auditing people to see if they were investing properly, to see if there was a trustee or a custodian for the funds.
"They have looked at the big firms, like stockbrokers, and they are satisfied . . . but they [FMA] have not really looked in detail [at small players].
Ross went to Otago University and started out with National Mortgage in their pension scheme, and later ran Challenge Corp's super fund, before moving into Leadenhall, a Wellington fund manager. Fairfax NZ
- © Fairfax NZ News
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