A Christchurch-based economist who convinced some of New Zealand's wealthiest businesspeople to plough tens of millions of dollars into his Cayman Islands-based investment fund has been charged with fraud, the Herald can reveal.
Kelly Tonkin, 52, had charges filed against him by the Serious Fraud Office on March 26, according to court documents. He has yet to enter a plea and is next expected to appear in court on May 27.
The alleged fraud is believed to be one of the biggest of its type in New Zealand history and its alleged victims included several rich-listers.
According to the charging documents, the SFO claims that investors in Tonkin's Penrich Global Macro Fund were told the scheme was worth $137.2m in February last year, but actually had a value of only $20.7m.
Penrich collapsed suddenly in March 2020 and liquidators were appointed to its branches in London, the Cayman Islands and Christchurch. They told investors that a "significant discrepancy" had been uncovered. The SFO began investigating soon after.
Tonkin was charged by SFO principal investigator Willie Harris at the Christchurch District Court with five offences, including two of false accounting; two of making false statements to cause losses or induce new investors, and; one count of forging a fake audit letter.
Late on Monday night, Judge Jane McMeeken issued an order suppressing the names of "all complainants and any connected persons such as investment advisors" until Tonkin's next appearance.
When the Herald visited his Christchurch home yesterday, Tonkin said he wasn't in a position to comment. "I think I'm still in the can't-say-anything stage at the moment," he said.
Asked if he intended to defend the charges, Tonkin replied: "I haven't even got to that point as yet."
The false accounting charges relate to Tonkin's alleged inclusion of false asset values and hidden cells in the fund's "Monthly Value" spreadsheets for nearly a decade, from September 2012 until the fund's sudden freezing in February 2020.
For instance, in September 2012 the fund reported a value of $13.6m, but this was alleged by the SFO to have been inflated by $10.6m.
In 2016, a UK pension scheme noted in its annual report that it had withdrawn from the fund "due to the delay in the provision of audited accounts ... and the auditor's inability to verify the valuation of the underlying assets".
Charging sheets allege that a number of international clients stopped receiving monthly investors statements around this time, suggesting they withdrew their investments.
According to charging documents, on December 18, 2017, Tonkin is alleged to have manufactured financial statements that gave a false picture of the fund's position in 2016.
"The defendant falsely stated the total assets, total liabilities and the net assets of the Penrich Global Macro Fund," the SFO alleges in its charge of forgery. "The defendant forged a BDO Cayman Islands auditors report and attached it to the Financial Statements."
The charges of false statements relate to Tonkin's representations to investors, both in including the allegedly fraudulent inflated value in their monthly account balances, as well as in monthly updates on his trading activity which the SFO allege far understated the level of risk and losses he was incurring.
For instance, in July and August of 2019, the SFO alleges, Tonkin told investors his trades across six currencies had generated monthly returns ranging from losses of 3.6 per cent to profits of 2.3 per cent. In reality, his trading verged on rogue and he lost at least 26.4 per cent each of these month in each of the currencies he traded - and booked losses of 274.4 per cent in August on deals involving the United States dollar.
But worse was to come the following month, the SFO alleges, when in September 2019 his USD trading recorded losses of 1575.5 per cent - suggesting highly risky risk-leveraged trading that saw him lose $15 for every $1 invested. He told his investors in Penrich's corresponding "Fund Fact" statements that USD trading that month had generated profits of 0.6 per cent.
Tonkin grew up in Christchurch and graduated from Canterbury University with an honours degree in economics, before working at Treasury, then Banker's Trust where he made regular media appearances giving expert economic and financial commentary.
He moved to London in 1999, working at ill-fated investment bank Lehman Brothers, before starting Penrich in 2004 and returning to New Zealand a decade later where he became a fixture in Canterbury football and Cashmere school boards of trustees.
Until the collapse of Penrich Tonkin was well-known and respected in financial circles.
The charges he faces all carry a maximum sentence of 10 years in prison.