A self-employed Auckland stockbroker, whose clients included his friends and family, has been accused of $2.5 million of fraud.
The Serious Fraud Office announced yesterday it had laid 10 Crimes Act charges against Gregory Alan Arnott, of option-trading firm Derivatek New Zealand.
Arnott allegedly received around $2.5 million for options trading but then used the money to repay other investors, to fund a portion of the fee on a US$20 million ($24.5 million) loan and for personal use.
In order to conceal this, the 49-year-old allegedly issued false statements to investors.
Acting SFO chief executive Simon McArley said Arnott allegedly started out as a bona fide financial adviser but suffered significant losses before his offending. McArley said a lot of Arnott's clients were from his circle of friends and family.
"People were investing on a basis of a bond of trust rather than [having] any strong understanding of what they were investing in," he said.
McArley said this type of alleged "affinity fraud" was a growing problem and highlighted the importance of carefully assessing investment risks.
According to Companies Office records, Arnott has a listed address in Pakuranga.
When the Herald visited the residence yesterday, Arnott said "there are two sides to a story" but would not comment any further. He did say the charges would be defended.
The SFO's investigation into Derivatek was born out of its probe of another of Arnott's companies, Australian Securities Limited.
The fraud office expects to charge another individual in relation to the activities of Derivatek, which is a firm trading on behalf of New Zealand clients on the Australian stock exchange.
Arnott is Derivatek's sole director and is a former employee of Macquarie New Zealand.
He faces five charges of theft by a person in a special relationship and five charges of false statement by a promoter and is due to appear in the Auckland District Court next month.