This meant they bought gold and borrowed against that investment to buy more, hoping the profits from its sale would be more than the interest payable.
John Fraser also ordered $85,000 worth of silver bullion from the company and spent months waiting for it to arrive.
His father, former TVNZ journalist Brent Fraser, said he called Mr Kairua yesterday and was eventually told the money or silver would not be handed over.
"He assured my wife and son that they would be getting most of their money today and the rest within 72 hours.
"Then he said to me he'd send me a tracking number on my email for John's silver bullion by 10 o'clock [yesterday] morning.
"By 1 o'clock, when I didn't have that, I phoned his office and said, 'I'm extremely disappointed. I don't believe you're going to send it to me'.
"Then he just paused for few seconds and said, 'Brent, I have some bad news', and I knew what he was going to say, and of course that's what he said: that Rose, John and Lela would not be getting their money back and John won't be getting his bullion."
Most of the money invested was from an inheritance from the children's grandmother in the US. Brent Fraser said the news was devastating for his family, who had also suffered through the Canterbury earthquakes.
John Fraser said Mr Kairua blamed the loss on trader Elijah Geldman, who had since left the company.
"[Mr Kairua] told us the money was being held in a vault in Europe and it was backed by Lloyds of London as an insurer and now he's told me that ... Elijah Geldman has gone and folded all this money somewhere else."
Gus Elijah Geldman resigned last September after Herald revelations that he had been charged with fraud by US federal authorities.
He and another man were accused of "participating in a conspiracy", including forging signatures and falsely identifying themselves as a securities broker and a "comptroller of a legitimate company" to entice investors to give them money.
At the time of the resignation, a Bullion Buyer director, Simon Bratley, said the company was determined to stay in business and was hiring a new bullion trader.
He said clients' investments were safe.
Mr Bratley resigned as a director on January 27, according to Companies Office records, and did not return phone calls yesterday.
In a conversation taped by Brent Fraser, Mr Kairua asked him not to take any "drastic action" as he was looking to inject capital into the business in a bid to pay out investors.
Any "scaremongering" could mean the capital injection could fail.
When the Herald visited the firm's office yesterday, a receptionist said Mr Kairua was in meetings and unavailable for comment.
He did not return phone messages and was not at his West Auckland home last night, according to a person at the house.
A couple seen to visit the home last night argued with a member of the household on the doorstep and were overheard saying they would be calling the Serious Fraud Office.
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