Opes Prime, was put into receivership last week owing $1 billion to lenders.

The corporate watchdog is investigating allegations of fraud and manipulation against the head of Opes Prime, which was put into receivership last week owing $1 billion to lenders. The Australian Securities and Investments Commission (ASIC) is looking into allegations that Opes Prime Chief Executive Laurie Emini instructed staff to falsify the accounts of six wealthy clients to help prevent them from personal losses of up to $200 million, according to a transcript of court documents from a Federal Court hearing last Friday. The collapse of Opes Prime is the biggest of its kind in Australia since the global credit crunch took hold in August last year. Opes Prime's problems stemmed from severe and sustained financial market volatility, which continues to adversely affect some market participants.
ASIC sent a special team into Melbourne-based Opes Prime late last week after the group was placed into receivership by creditor Australia & New Zealand Banking Group after "irregularities" in trading accounts were uncovered.
A senior ASIC investigator, Richard Vandeloo, told the Federal Court that Opes staff were instructed to falsify trading accounts so that the group's high net worth clients would avoid margin calls, according to the transcript.
"Based on conversations of the receiver's staff with employees of the stockbroking company (Thursday), I'm advised that Mr. Emini, over a three month period between December last year and February this year, instructed various staff to make entries in clients of high net worth to avoid margin calls being made...," Vandeloo said.
He said that staff were instructed to change the loan-to-value ratio within the group's client portfolio. Traders said this would make the portfolio appear healthier than it was. Vandeloo also said there are allegations that there may have been a "round robin" of stocks to cover the positions of the clients in question.
When asked by judge Ray Finkelstein if there was any suspicion that the clients were involved in the alleged falsification of accounts, Vandeloo said: "In relation to ... one client worth A$145 million, there is business connections between Mr. Emini and that particular client." After being pressed by the judge about whether there was any suggestion by staff or the receivers that the clients were involved, Vandeloo said: "Of the six they have only made that suggestion in relation to one."
Vandeloo also said there were allegations of the falsification of company records, which could include accounting records. A spokeswoman for ASIC said the investigation is continuing. The comments were made at a hearing where ASIC sought an order preventing Emini from leaving Australia.
When Opes Prime was put into receivership it owed ANZ $650 million and Merrill Lynch & Co. a further $350 million, receiver Deloitte said last week.
Merrill Lynch and ANZ took control of Opes Prime's shares last week and started selling them off to recoup the loan amounts. Merrill Lynch has largely finished selling shares to cover its loan to the group, a person familiar with the situation said Tuesday. ANZ, which hired Goldman Sachs JBwere to handle the sales, has sold around 25% of the portfolio it received, according to the Australian newspaper. ANZ said last week it doesn't anticipate a material loss from its exposure to Opes.
Brokers who did not want to be named, but who have knowledge of the affected stocks, said ANZ took on shares in around 675 companies, including major stocks such as Westfield Group, QBE Insurance Group, Orica and Aristocrate Leisure. An ANZ spokeswoman declined to comment on this matter, as did a spokeswoman for Goldman Sachs JBWere. The ANZ spokeswoman said that the bank continues to realise "solid" value for the shares sold, consistent with the bank's objective to undertake an "orderly unwind" of the portfolio. A number of small and mid-cap companies, including Gindalbie Metals, have requested trading halts in recent days while they clarify the impact of the Opes collapse on shareholders who held shares through the brokerage.