"There were people picking up fist full of money ... it was pretty exciting then I discovered it belonged to someone there," Mr Allen said.
"I was going round picking up money and this guy gratefully took it off me."
Mr Allen described the man as Maori and fairly solid.
He said there would have been thousands of dollars, as he had handed over about $3000.
The man drove off and a short time later come back in a small white car with another man and together they kept looking for the money.
Another man said he was heading to the Four Square to get some money out before heading to the Kamo Christmas parade and the last thing he expected to see was money blowing everywhere.
"I was there for about a minute and I reckon I picked up about $3000. My hands were so full I kept dropping some of it."
His wife also collected some of the cash and handed it over.
Hikurangi Hotel duty bar manager Tony Tito said patrons had been talking about the mystery over a few pints.
"No one could really believe that it had happened for a second time. People are really starting to wonder what is really happening in town."
Two hours later a couple of woman had been trying to get $20 bills out of the drain outside the pub.
Hikurangi resident Don Sinclair had heard it was drug money.
"I could have done with a few $50 dollar bills ... it wouldn't have gone astray."
Northland police spokeswoman Sarah Kennett confirmed police were contacted by a member of the public who reported seeing a man picking money off the road. Police were continuing to investigate the mysterious cash dump.
The first incident involved a vehicle police believed was registered to an owner in Mount Maunganui, who frequently visited Northland.