More than 100 criminal charges have been filed by the Financial Markets Authority alleging disclosure breaches and financial record-keeping irregularities relating to the Forestlands group of companies.
The FMA said in a statement today it has charged an individual in the Nelson District Court.
The Government agency did not name the person.
The allegations include a claim that omissions of security arrangements of an externally borrowed $1 million loan from the financial statements of certain Forestlands companies were knowingly left out and misrepresented the financial position.
Further allegations include failures to file the Forestlands companies' financial statements for the financial years ending March 2015, 2016 and 2017, a failure to keep proper accounting records, and failures to keep and supervise share registers.
In total the FMA filed 111 charges under the Financial Reporting Act, Financial Markets Conduct Act, Crimes Act, and Companies Act.
The leading three charges under the Financial Reporting Act carry a maximum penalty of five years' imprisonment and/or a fine of up to $200,000.
The Forestlands group, which claimed to have owned 1,934ha of forest land on the east coast of the North Island and in the south-west of the South Island, consists of 18 different numbered companies.
From 1998 to 2011 Forestlands New Zealand Limited and its 18 related companies were incorporated, which each raised up to $2.75m from the public via share offer.
Shares in the companies were divided into three categories, class A, class B and class C.
Public investors were subscribed to class B shares, which were entitled to any dividends, or distributions from a wind-up, but had no voting rights.
FMA general counsel Nick Kynoch said: "The Forestlands companies raised a significant sum from the public and investors were left in the dark and concerned for their hard-earned money. Businesses must maintain proper accounting records and ensure financial statements are accurate.
"The Forestlands investment structure gave investors very little control but a fundamental right they had was access to financial information. We are seeking to hold this conduct to account, however we recognise shareholders may be left out of pocket."
After the Forestlands group ran into financial difficulty, a sale process was commenced in mid-2015, but investors were not notified or consulted, the FMA said.
Investors began to raise concerns about the lack of financial information and rumours around the sale of the forestry assets and the associated treatment of investor funds.
In October 2016, the forestry assets were sold for about $23.5m and in early 2017, at the direction of the FMA, $18m was placed in trust to secure the interests of investors.
In September 2018, the FMA successfully applied for the 18 Forestlands companies to be placed into liquidation after determining that insufficient progress had been made towards completing the shareholder distribution process.
The liquidation process is ongoing and the FMA has not sought costs.
Forestlands New Zealand Ltd was liquidated separately as it was not a financial markets participant.