More than $40 million dollars has been frozen by a fund with its headquarters in Hastings, due to debts owed by bankrupt Wellington property developer Terry Serepisos.
Midlands Mortgage Trust was asked to freeze the funds by its trustee.
Midlands was established by the nominee mortgage companies of three law firms - DAC legal in Waipukurau, Bramwell Grossman in Hastings, and Halliwells in Hawera.
DAC Legal's nominee company is separately owed more than $2 million by Mr Serepisos.
It is unclear how much was owed to Midlands but in July its chairman Preston Bulfin told Hawke's Bay Today Midlands had "a couple of loans" to Serepisos or related entities, but the impending sale of two Wellington apartments "would take them out of arrears".
Mr Bulfin declined to comment further today.
A recent newsletter to investors said they could expect a decrease in return, the amount to be determined. Directors were seeking to protect as best as possible the capital investment made by investors in the fund and to continue to try and pay to investors a competitive rate of return.
"To this end the directors have formed the unanimous view that it is essential to hasten the clean up of loans in default, even if that involves sale of securities at discounted prices," the newsletter said.
The reduction in the price of each unit held by investors was being assessed and until then no withdrawals could be made.
"However, it is anticipated we should be able to agree such a position with the trustee within the 90 business days allowed for in the trust deed to process withdrawals."