A report by Fundsquire’s administrators details the company’s missing millions

Administrators say the company’s CEO was lent millions of dollars by his father’s company and now numerous tech start-ups have been left in the lurch.

Fundsquire founder and chief executive Damien Petty.

The chief executive of finance firm Fundsquire allegedly borrowed millions of dollars from his father’s company to prop up the business before it ultimately collapsed and laid off all of its staff, The Australian can reveal.

A report by administrators Jonathon Keenan and Peter Krejci of BRI Ferrier has revealed a complex web of undocumented loans and advances made to Fundsquire, which start-ups and small businesses across Australia relied on for funding.

Antra Group, a finance company led by Raymond Petty, the father of Fundsquire chief executive Damien Petty, allegedly owed creditors up to $37m when it entered administration in September, including $20m worth of undocumented loans from Raymond to his son Damien and Fundsquire, according to the report. It says Antra, which traded as FIFO Capital, was operating while insolvent from as early as 2018.

Fundsquire, which had 54 employees globally and about two dozen in Australia, provided loans to start-ups and SMEs through early access to their R&D tax credit payments. Fundsquire announced in September that it had lent more than $110m in funding to start-ups and small businesses globally since it began operating in 2017, but it abruptly shut up shop this month.

“The effect of the director’s actions to advance loans to himself and related parties, which now may be significantly impaired, appear to only have benefited those parties, to the detriment of creditors,” the administrators allege of Antra in their report.

“Those losses will likely lead to a potential range of claims against the director and related party recipients of funds, such as breach of duty, insolvent trading, accessorial liability (as aiding and abetting) and/or potentially a scheme to defeat creditors.

“We have made substantial inquiries to get clarity around why the funds were advanced to the ­director and where those funds then went. The parties have not been forthcoming with the relevant information, or verification as to the quantum of funds flow.”

Antra had minimal capital reserves for a financier, the administrators found, instead funding its operations through debt. The company borrowed funds from creditors, in the aim of making a profit on the net differential on interest and fees earned, while minimising losses from bad debts.

“The cost of capital (interest paid on funds borrowed by the business) and the likely impaired loans, including substantial loans to the director and related parties, have caused a deterioration in the company’s cashflow and ultimately the collapse of the business,” the administrators found.

As The Australian first reported last week, the Melbourne-based Fundsquire left start-ups and small businesses in the lurch when it stood down its dozens of staff and abruptly cancelled its loan agreements this month.

Damien Petty has not been fully co-operative with administrators and did not disclose information including his current financial position and a range of ­financial statements, according to the administrators. Mr Petty has declined to respond to questions sent by The Australian and refused requests for comment.

“There is a lot of information that was not provided. In some cases, we were advised that the information was not available, in other cases there were no meaningful responses provided,” the administrators report states.

“The absence of information or considered explanations on the circumstances leads us to necessarily have a sceptical mindset when forming views and making recommendations for creditors, particularly where there are substantial creditor claims and corresponding impaired related-party debtors.”

Antra is insolvent and the administrators have recommended its creditors place it into liquidation, rather than opt for a proposed deed of company arrangement (DOCA) that would have aimed to pay back creditors over a period of six years. “We recommend that creditors resolve to wind up the company,” they write.

As The Australian reported last week, Melbourne-based Mitchell Asset Management has provided a lifeline to start-ups and small businesses relying on Fundsquire’s loans, acquiring the failed local lender’s Australian and Canadian loan books totalling $50m, while Fundsquire’s UK loan books have been acquired by London-based online lending platform Sprk Capital.

Mr Petty is understood to be in talks with a potential buyer for the rest of his business.

Mitchell Asset Management chief executive John Mitchell said: “We’re stabilising things … We’ve stepped into the breach.”