The first of three test claims against RAM investors who withdrew a combined $3.8 million from the scheme before it collapsed is being heard today.

Ross is serving 10 years and 10 months’ jail for defrauding investors of $115 million.

Bruce Tichbon lost money to Ross and represents other victims. He said the test case would have profound implications for public confidence in the New Zealand financial markets.

“If the RAM recoveries are small it will send a clear message that there are significant regulatory and legal problems in New Zealand, and investors should be extremely wary of putting their hard-earned savings in the financial markets here.”

The amount that could be clawed back from those who withdrew profits from RAM is substantial. Investors withdrew $60 million more than they contributed over the last five years of the company.

Tichbon said burned investors were due to arrive in Wellington from around the country for the case today. “What’s attracting a lot of people is they want to find out who it is who has got their money.”

The investor in court, who has name suppression, had wanted the case kept secret.

Tichbon said it was potentially unfair that only a small number of people were being picked on so far to have money clawed back.  About 20 other investors made withdrawals in the two years before the scheme collapsed.

Liquidators have indicated further action could be likely if these cases are successful.

Ross’ offending has been cited as one of the reasons for a crackdown on DIMS providers but Tichbon said he did not think more regulation was the answer to stop it happening again.

“Whatever regulation tries to do, those who have the intent to commit fraud can almost invariably outsmart it. It might change the nature of the fraud but the fraud still happens.”

But he said the law as it stood was hopelessly inadequate and a poor outcome for RAM investors would be damaging for market confidence.

“The fact that it’s taken two years for the first hearing on a clawback to take place… we haven’t got proper laws in this country. It’s estimated 175,000 people were robbed of $6 billion after the financial crisis and recoveries there are 10% to 15%. The vast majority of money just disappears. New Zealand had a reputation of being an investment wild west and the results of the last seven or eight years indicated that.”