PENSIONERS were lured into Gold Coast-based Equititrust Income Fund (EIF) with the promise of a modest but safe return but investors who put $194 million into the fund face a virtual wipe-out, according to an update from the fund's receivers.
In a report to investors on Friday, David Whyte - who was appointed receiver by the corporate regulator in an attempt to stem investor losses - said unitholders face losing close to 90 per cent of their money.
He said investors could expected to receive between 11¢ and 19¢ in the dollar, down from a previous estimate of 15¢ to 22¢, "due to a revision of the estimated values of certain property securities (based on offers received being less than the professional valuations held) and the accrual of outstanding rates and land tax".
The latest return does not include a potential claim on investor funds from the liquidators appointed to EIF's former operator, Equititrust Ltd. According to the report, the liquidators from Hall Chadwick are now attempting to extract more than $800,000 in fees and expenses that relate to their previous appointment as Equititrust's administrators.
The receivers are also attempting to resolve claims associated with the controversial founder of Equititrust, Mark McIvor. The McIvor Superannuation Fund is claiming $3.3 million in principal and interest from the EIF that would also rank ahead of returns for its investors.
But there is also potential upside.
The return estimate does not include potential wins from legal action the receivers are conducting, which includes two claims for negligence and damages against a valuer that total more than $10 million.
The report said the various actions were expected to yield "several million dollars" for investors, "although this may take some time to realise".
Piper Alderman is also conducting a class action on behalf of EIF investors to recover the loss on their investment.
"The class action will plead a case for breach of duties by the company and several of its directors, claims of imprudent investments by the company and its directors, and for other breaches of the Corporations Act," said the law firm.
EIF is one of $20 billion worth of investment schemes forced to freeze redemptions in 2008 after the government guaranteed bank deposits during the financial crisis.
In April 2011, as problem loans mounted and Equititrust's bankers demanded that loans be repaid, the fund stopped paying distributions to its 1500 investors. Many investors are pensioners who relied on the payments for basic living expenses.
More than $70 million of the fund's problem loans were linked to Dudley Quinlivan, a former two-time bankrupt who was once denounced in Queensland's Parliament as the "King Con" of property marketeering schemes.
The Australian Securities and Investments Commission appointed an independent receiver to the fund in November 2011. The fate of its operator at the time, Equititrust, was sealed earlier that month when the company revealed it was unlikely to find an insurer to cover it for professional indemnity.