Inside Ralan’s ‘ponzi-style’ deposit scheme
PROMISES of astronomical interest rate returns saw thousands of buyers swarm to buy $1.68 billion worth of Ralan Group's future Gold Coast developments before a single sod was turned.
The spending spree, which the administrator has described as a "Ponzi-style" program, saw more than 82 per cent of unbuilt units in Ruby and Sapphire pre-sold and is thought to have ultimately contributed to the group's spectacular $500 million-plus collapse.
Administrators are analysing bank statements and accounts to trace more than $277 million in deposits after buyers were tempted by interest returns of 15 per cent to sign them over to Ralan Group as unsecured loans.
UK-born Ralan Group head William O'Dwyer, once thought to be the Gold Coast's largest private landholder, declined a request to surrender his passport to administrators of his 58 failed companies, but assured them he wouldn't skip the country. He is co-operating with the administrators.
Preliminary figures released by administrators from Grant Thornton revealed Ralan had contracts for 1885 of the 2288 apartments slated for the entire six-tower Surfers Paradise site, currently home to Paradise Resort.
For the only completed Ruby tower, there were 219 settlements from the 243 apartments.
Buyers in the projects paid an average 14 per cent deposit on the apartments, with some paying as high as 40 per cent.
Administrator Said Jahani said much of the $277 million in now-missing deposit funds had gone into covering losses on previous projects and for funding interest payments for previous buyers as new buyers tipped in.
"Before his expansion to the Gold Coast, (Mr O'Dwyer) has run multiple residential developments in Sydney, but nowhere near as big as what he planned on the Gold Coast," he said.
"Some might have been quite profitable, but a number of them ran into difficulties and that meant the company lost a lot of money - so I believe some of the funds have gone into plugging those losses.
"We believe it has also gone to fund the 15 per cent interest that he'd offered to investors, sort of like a Ponzi scheme.
"Thirdly, funds have been spent on personal expenses - things like houses, cars and investment properties.
"The key part of this investigation is to go back in time and follow the cash."
Early indications are that Ralan's marketing of the Gold Coast projects targeted many customers of his previous, much smaller, Sydney developments.
The side agreements and their attractive 15 per cent interest returns are understood to have been a Ralan signature for a number of years.
Staff and contractors of the group, including sales agents, are also owed entitlements - a situation complicated by the fact that many of them bought apartments in the Gold Coast projects - some signing on the units in lieu of wages.
Scores of those victims rallied outside NSW parliament earlier this month, demanding Government action on the collapse.
The Queensland and NSW Governments are each looking into the legality of the side agreements for property deposits, while at least one group of buyers has engaged a lawyer for a possible class action.
Mr Jahani said it was too soon to tell how many buyers were employed or contracted as agents for Ralan, but that it was "a good chunk" of them.
The administrators have granted Mr O'Dwyer extra time to prepare statements of financial position, known as the report as to affairs or RATA, for the 58 failed companies in his group.
"He has no legal obligation to hand over his passport, but we have asked for it," Mr Jahani said.
"The response we got back was `no', but that he would not be leaving the jurisdiction.
"He is taking our calls and has been co-operating."
As well as the lost deposits, more than $200 million is understood to be owed to secured lenders, including Melbourne financier Wingate, Balmain and Westpac.
Wingate and Balmain have appointed receivers to the companies which hold assets secured against their loans, including the Paradise Resort and the land on which Ruby and Sapphire were to be built.
Getting to the bottom of what happened is a mammoth task, expected to involve between 1800 and 2000 creditors across the 58 Ralan Group companies.
"So $277 million has come in from purchasers and investors, and a bunch of other money has come in from lenders - a ballpark total of $500 million," Mr Jahani said.
"My task now is forensically analyse where that money has gone, chasing bank statements and going through accounts to see where that $500 million ended up.
"We are still just two weeks in and, given the size and complexity, it will take us time so I'm trying to manage people's expectations around that."