Individual investors are likely to bear the cost of Terry Serepisos' $2 million debt to Waipukurau law firm DAC Legal's nominee company.
An investors' guide said funds were pegged to individual mortgages, such as the lending to Serepisos.
DAC typically would charge borrowers such as Serepisos 9 per cent interest but paid investors 6 per cent.
Mortgage manager Stephen Smith handled the day to day aspects of investing and was the liaison person in regards to investments with Midlands Mortgage Trust.
Midlands recently froze more than $40 million of investors' money after Serepisos' bankruptcy last week.
Midlands uses funds from the nominee mortgage companies of law firms DAC and Bramwell Grossman, of Hastings, and Halliwells, of Hawera.
The partners of DAC Legal - John Campbell, Bridget Chrystall and Juliet Van der Oord - do not guarantee funds invested in their nominee company.
Nor are the funds covered by the Solicitors Professional Indemnity Fund.
Lending decisions are made by DAC's partners. Details of a proposed mortgage are sent to investors for them to sign their approval.
Investors cannot withdraw their funds from the nominee company unless a replacement investor can be found.
Former Central Hawke's Bay mayor Hugh Hamilton resigned as a partner and director of DAC on June 30, amid allegations of impropriety.
He has since faced bankruptcy proceedings due to an unpaid debt for the purchase of the Wellington brothel.
DAC partner John Campbell has changed the registered address for the brothel from the law firm offices to Mr Hamilton's private address.