The liquidator of Blue Chip Group has dropped proceedings against the failed property investment group's former directors and auditors saying it was unable to raise enough funds for a legal battle.
The company failed in 2008 owing $84 million to more than 2,000 investors. Liquidator Meltzer Mason Heath filed a $40 million claim against the failed property investment group alleging "inherent flaws" in its business model, which involved selling apartments off the plan in Auckland's central business district.
The lawsuit has now been withdrawn, the liquidator said today.
"For more than two years the liquidators attempted to obtain litigation funding for the proceedings, which arose out of the collapse of the Blue Chip Group," Meltzer Mason's Jeff Meltzer said in a statement. "Ultimately, it was found to be impossible to secure the necessary funding to prosecute a large and complex claim."
Meltzer said there were "significant secured and preferential liabilities" within the Blue Chip Group which would need to be settled before any dividend could be paid to unsecured creditors.
"It was apparent that substantial recoveries would need to be made before any return to investors and unsecured creditors," he said. The liquidators would now move to wind up the liquidation.
The Financial Markets Authority still has an investigation underway into Blue Chip. The firm was probed by the Serious Fraud Office, though the white-collar crime investigator decided there was insufficient evidence to pursue a prosecution, even if it operated in a "moral vacuum".
Founder Mark Bryers escaped a prison sentence in 2010 when he pleaded guilty to 34 charges relating to the company's mismanagement and improper accounting. He received a $33,750 fine and 75 hours' community work.