In an attempt to deliberately conceal the extent of its debts owed to creditors, a report has revealed that apartment developer Ralan Group traded insolvent as early as 2014.
The high-profile Sydney group collapsed at the end of July after 20 years as a sales agency and developer, leaving a $2 billion development pipeline of more than 3,000 residential units and accommodation assets of 600-plus rooms in disarray.
Ralan, whose flagship project is the $1.4 billion Ruby Collection at Surfers Paradise, has been found to owe $238 million to banks and financiers as well as $241 million to hundreds of apartment buyers after undertaking a Ponzi fund raising model.
Some of Ralan's 1,500 creditors have alleged they were owed as much as $500,000 in unsecured deposits on their Sydney and Gold Coast off-the-plan purchases.
According to voluntary administrator Grant Thornton, Ralan, led by director William O'Dwyer, has been insolvent since 2014 and was altering its records in the lead-up to its recent collapse.
Administrators filed to ASIC on November 28, after reviewing 105 accounts for the period between dating back to 2016.
Grant Thornton found that Ralan's funds were used to pay for exorbitant construction costs in unprofitable projects, running costs and large interest payments to private lenders and apartment buyers who provided their apartment deposits as loans.
It was also found through an analysis of cashflow that O'Dwyer had been siphoning funds out of the company between 2016 and 2019 to spend on personal expenses, holidays and bitcoin.
“This was a large and complex business with a diverse range of stakeholders and creditors,” Grant Thornton Australia managing partner Said Jahani said.
“The nature of their funding model, coupled with what we have determined to be a deliberate effort to conceal the extent of debts owed to purchasers who had released their deposits from Ralan’s financiers by altering the Group’s records benefitted William O’Dwyer and his related parties.”
It was found that funds came in to the group from lenders who provided finance, the sale of properties from completed developments and purchasers who agreed to release their deposit in return for interest of between 15 per cent and 20 per cent.
“Unfortunately due to the extent and duration of the alleged financial misconduct within The Ralan Group—there may be very little left for creditors.”
Grant Thornton has now recommended creditors be given the opportunity to consider the report at the second meeting of creditors to be held on 9 December where the future of the Group will be determined.
Creditors were last briefed in August when more than 1,000 people filled the Wesley Conference Centre on Pitt Street in Sydney.