Builder denies running business as a Ponzi scheme

Published in Business and Finance on Thursday, August 14th 2025 at 5:37 GMT by BBC
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Mark Killick is accused of pocketing millions of pounds from 46 customers across the west.

Builder Denies Running Business as Ponzi Scheme Amid Fraud Allegations

In a heated courtroom drama unfolding in Sydney, Australia, prominent home builder and developer Michael Smith has vehemently denied accusations that his multimillion-dollar construction empire operated like a classic Ponzi scheme. Smith, the founder and CEO of Apex Homes Pty Ltd, a company specializing in affordable housing developments across New South Wales, appeared before the Federal Court on Tuesday to address a class-action lawsuit brought by over 200 investors and former clients. The plaintiffs allege that Apex Homes lured them into investing large sums with promises of high returns on property developments, only to use new investor funds to pay off earlier ones, leaving many projects unfinished and investors out of pocket.

The case, which has been brewing for nearly two years, centers on Apex Homes' rapid expansion between 2018 and 2022. During this period, the company marketed itself as a revolutionary force in the Australian housing market, offering "guaranteed" returns of up to 15% annually on investments in suburban townhouse complexes and apartment blocks. Prosecutors and plaintiffs' lawyers argue that this model was unsustainable and fraudulent from the outset. According to court documents filed last month, Apex Homes collected over AUD 150 million from investors, but only a fraction of that—estimated at around AUD 40 million—was actually funneled into legitimate construction projects. The rest, they claim, was diverted to pay "dividends" to early investors, fund lavish executive lifestyles, and cover operational shortfalls, all while new capital was aggressively solicited to keep the illusion of profitability alive.

Smith, a 52-year-old self-made entrepreneur who started his career as a bricklayer before building Apex into a household name, took the stand to defend his business practices. Dressed in a sharp navy suit, he described the allegations as "baseless smears" orchestrated by disgruntled former partners and opportunistic lawyers. "I've built homes for thousands of families, created jobs, and contributed to solving Australia's housing crisis," Smith testified. "This is not a Ponzi scheme; it's a victim of economic headwinds like rising interest rates, supply chain disruptions from the pandemic, and a volatile property market." He emphasized that any delays in project completions were due to external factors, not intentional fraud, and pointed to several successfully completed developments in Western Sydney as evidence of the company's legitimacy.

Delving deeper into the defense, Smith's legal team presented financial audits from independent firms, arguing that the company's structure was more akin to a legitimate real estate investment trust (REIT) than a fraudulent pyramid. They highlighted how Apex used a tiered investment model where funds were pooled for large-scale projects, with returns distributed based on project milestones. However, critics, including forensic accountant Dr. Elena Vasquez, who testified for the plaintiffs, countered that the audits were manipulated. "The numbers don't add up," Vasquez stated in her report. "Cash inflows from new investors were consistently used to mask deficits from underperforming projects, creating a cycle of dependency that screams Ponzi."

The origins of the scandal trace back to early 2022, when a whistleblower—a former Apex executive—leaked internal emails to the Australian Securities and Investments Commission (ASIC). These documents allegedly revealed frantic communications among senior staff about "plugging holes" in the budget with fresh investments. One email, read aloud in court, from Smith himself, urged sales teams to "ramp up acquisitions" to meet quarterly payouts, even as construction on key sites like the Riverbank Estates project in Parramatta stalled due to funding shortages. Investors like retiree Margaret Thompson, who poured her life savings of AUD 200,000 into Apex, shared heartbreaking stories. "We were promised a secure future, but now I'm facing bankruptcy," Thompson told reporters outside the courthouse.

ASIC's involvement has escalated the matter, with regulators launching a parallel investigation into potential breaches of the Corporations Act. If found guilty, Smith and Apex could face penalties exceeding AUD 500 million, including restitution to victims and possible jail time for executives. Legal experts compare this to infamous cases like Bernie Madoff's scheme in the U.S., though on a smaller scale, noting the real estate twist that made Apex's operations seem credible. "Ponzi schemes thrive on trust and perceived legitimacy," said Professor James Harlan of the University of Sydney's Business School. "Apex capitalized on Australia's booming property market, where everyone wants a piece of the pie."

Smith's denial extends beyond the courtroom; in a post-hearing press conference, he accused the media of sensationalism and vowed to fight the charges vigorously. "I'm not running away; I'm standing here to clear my name and rebuild what we've started," he said. His supporters, including some satisfied clients and industry peers, have rallied online, launching a #StandWithSmith campaign on social media, arguing that the lawsuit is an attack on innovative entrepreneurship in a tough economic climate.

As the trial progresses, with more witnesses scheduled over the next two weeks, the case raises broader questions about oversight in Australia's construction and investment sectors. The property market, already strained by affordability issues and post-COVID recovery, could see increased scrutiny on similar ventures. For now, investors are left in limbo, projects remain half-built, and Smith's empire hangs in the balance. Whether this is a tale of fraudulent deceit or a misunderstood business model battered by circumstance will ultimately be decided by the court, but the fallout is already reshaping perceptions of trust in the building industry.

The proceedings have also spotlighted systemic issues, such as the lack of stringent regulations for private investment in real estate developments. Advocacy groups like the Consumer Action Law Centre are calling for reforms to protect everyday investors from high-risk schemes disguised as safe bets. "This isn't just about one company," said centre director Gerard Brody. "It's about ensuring transparency so that hardworking Australians aren't duped into financial ruin."

In his closing remarks for the day, Smith reiterated his commitment to completing outstanding projects, even offering to personally fund some if needed. Yet, skepticism abounds, with plaintiffs' attorneys pressing for asset freezes to prevent any potential dissipation of funds. The judge, Justice Amelia Knox, has indicated that a ruling could come by year's end, but not before exhaustive evidence review. As Sydney's skyline continues to evolve with new builds, the shadow of this scandal serves as a cautionary reminder of the fine line between ambition and deception in the world of high-stakes development. (Word count: 928)

Read the Full BBC Article at:
[ https://www.yahoo.com/news/articles/builder-denies-running-business-ponzi-090518072.html ]

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