The Serious Fraud Office is conducting a formal investigation into Ross Asset management, which is feared to be New Zealand's largest ever Ponzi scheme.

Last month the Financial Markets Authority won a freezing order over the firm and its founder David Ross, following complaints from investors unable to withdraw their money.

Acting SFO chief executive Simon McArley said the organisation had been working with the FMA over the last two weeks.

''An evaluation of the information now available has concluded that there are reasonable grounds to believe that an offence of serious fraud may have been committed and accordingly have commenced a Part II investigation under the SFO Act,'' he said.

McArley added: “We will continue to work closely with the FMA to ensure both agencies’ resources are applied effectively in a coordinated and timely manner.  We are meeting with the FMA and Mr Fisk early this week to progress that.

“The SFO notes with concern the comments made by Mr Fisk that it is likely the historical returns advised to investors may be fictitious and that what has occurred has the characteristics of a Ponzi scheme. Given the scale of the potential loss this is a matter we take extremely seriously”.

Last week the first receivers’ report into Ross Asset Management revealed that of the $450 million investors believed was being managed on their behalf, PwC and First NZ Capital had only been able to establish that around $10m existed.

Ross, who was the sole director, and ran the company with little more than administrative support, is now in hospital. The FMA and his lawyer, Pip England of Chapman Tripp, have refused to elaborate on his condition.

The company had more than 900 clients, many of who were attracted by the exceptional returns Ross claimed to offer, often in excess of 30 per cent a year.

However the returns were never independently audited and the FMA has said it appeared Ross misled investors about the service he offered. Rather than putting their investments into dedicated portfolios, as he claimed, the money appeared to have been simply pooled in one account, the FMA’s head of primary regulatory operations said last week.

Because he claimed to be offering advice, rather than an investment product, Ross was not required to be audited under FMA regulations.

- © Fairfax NZ News

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