David Ross' out-of-pocket investors expressed relief when the alleged Ponzi-schemer was arrested and charged yesterday, but he was bailed back to his luxury home.
Wellington-based Ross has been charged by the Serious Fraud Office with theft by a person in a special relationship, and false accounting.
The 63-year-old was remanded on bail yesterday to his family home in Woburn, Lower Hutt.
The financial adviser's property has a capital value of $2.2 million, according to QV.
While Ross is living in the home, it is subject to freezing orders made in the High Court last year, together with the group assets of Ross Asset Management (RAM). This asset freeze followed a Financial Markets Authority raid on RAM last November after investors complained about problems getting their money out.
Records sent to investors suggested RAM had shareholdings with a value of $450 million, but receivers could find only $10.2 million in the firm's accounts.
PricewaterhouseCoopers receiver John Fisk said at the time that he might have uncovered "characteristics of a Ponzi scheme" when looking into RAM's affairs.
This suspicion now has the backing of the SFO, which alleges Ross conducted this type of scheme and disguised it by falsely reporting client investments.
They allege that large chunks of client portfolios were shown to be invested through a broker called "Bevis Marks" but that these were fictitious and never existed.
As a result, clients' investment positions were overstated by $380 million, the SFO said.
About 1200 of RAM client accounts were affected by the scheme.
Some investors believed their investments were worth millions of dollars and are now facing financial hardship, given RAM's cupboards are bare.
One of Ross' clients, who had under $100,000 invested and did not want to be identified, said he felt "unbridled happiness" on news that the charges had been laid yesterday.
Bruce Tichbon, from the Ross Asset Management Investors' Group, said many of his members welcomed the move.
"A lot of people are expressing relief that something is happening at last ... but he [Ross] hasn't been locked in a cell, he's been bailed back to his luxury pad in Woburn Rd."
In their latest update to investors, RAM's liquidators said 207 of Ross' clients got more money out of the firm than they put in.
No legal action has been started to claw back any of these funds.
"The amount potentially recoverable through clawback is not yet quantifiable," the liquidators said this week, "but figures publicly mentioned of over $100 million are likely to be materially wrong."
• A Ponzi scheme is when investors are paid out using incoming money from new clients rather than profits or returns made from an operation.
• Such schemes generally require a constant stream of new investors, who believe their funds are being legitimately invested rather than being paid out to other clients.
• When these new funds dry up, payouts to investors cannot be made and the operation is exposed.