Online tech retailer Mwave probed for insolvent trading amid $30m collapse
The administrators of Australian computer and video game retailer Mwave have revealed the business may have traded while insolvent, as details of the company’s $30m collapse are exposed.
The administrators of Australian computer and video game retailer Mwave have revealed the business may have traded while insolvent since 2022, as the extent of the company’s staggering multimillion-dollar collapse is exposed.
The online seller, which was sold to Booktopia owner digiDirect last month, one day before it entered administration, collapsed owing creditors over $30m.
This included $13.8m to secured creditors, $4.7m to unsecured creditors and $11.9m to related party creditors, administrator estimates reveal.
Mwave’s business and assets, including plant and equipment and the company’s brand and customer database, were sold to digiDirect on June 12 for $520,000.
The retailer, which was founded in 2006 by director Victor Lee, and has been a popular supplier of gaming hardware, accessories and PCs, was placed into voluntary administration a day later.
Administrators Antony Resnick and Henry Kwok of dVT Group have now revealed their preliminary investigations which indicate the company may have been insolvent since “at least” June 2022.
“The company has been incurring trading losses at least since the financial year ended 30 June 2022 to the date of our appointment,” Mr Resnick said in a report to creditors lodged with the corporate regulator.
“The current ratio has been below one (meaning the company did not have enough current assets to cover its short-term liabilities) since the financial year ended 30 June 2023 to the date of our appointment.”
He said if an insolvent trading claim was proven to exist, the estimated claim against the director Mr Lee and the holding company Mwave Holdings could total $15m.
“Only preliminary investigations have been performed due to the time constraints imposed on the voluntary administrators. A liquidator, if appointed, will need to investigate further into this aspect,” he said.
Mr Resnick said Mr Lee advised that in early 2021, a private equity fund became the majority owner of Mwave and appointed a new CEO and CFO with “no operational experience” in tech retail, leading to significant financial losses and depletion of cash reserves.
“As a result, the director had no alternative but to step down as the CEO and was not involved in the business operations from October 2022,” he said.
“After the equity funder realised the company was mismanaged by the board and executives appointed by it, in February 2024, the director was requested by the equity funder to return to the company to rescue the business.”
Financial records show the business’ gross profit plummeted from $23m in FY22 to $13.6m YTD25. Sales also dropped from $168m in FY22 to $110m YTD25.
Mr Resnick said Mr Lee attempted to stabilise the business, but repeated requests for working capital from the equity funder were denied, ultimately contributing to the company’s decline by early 2025.
New owners digiDirect agreed to take over the employment of around 100 Mwave permanent and casual employees, as well as accrued annual leave and long service leave entitlements in excess of $1m.
As part of the sale digiGroup also agreed to reimburse rent for a period of 30 days totalling $106,000 to allow an assessment of the stock claimed as secured by a number of vendors.
Pending customer orders, totalling more than $3m, will also be fulfilled.
“During our discussions with the digiDirect Group, it has advised us of its intention to fulfil the unfulfilled customer orders at its own expense, to preserve the brand name of Mwave,” Mr Resnick.
But unsecured creditors owed a total of $4.7m remain an ongoing liability of the company, with administrators unsure whether they will receive any return if the company is tipped into liquidation.
The largest unsecured creditor is banking giant American Express, owed over $1m.
A total of $11.8m is owed to related party MWave Holdings but Mr Resnick said the company had not yet lodged a claim during the administration.
“It is presently difficult to assess the likely recoveries under a liquidation scenario as we have not completed the realisation of the company’s assets and we have not completed the determination of the secured creditors’ claims over the company’s assets,” Mr Resnick said.
“However, based on the below position, it is estimated that priority creditors will be paid in full in respect to the outstanding superannuation and unsecured creditors may receive a dividend.”
With no deal to creditors provided by the director as of yet, Mr Resnick said he had no option but to recommend that the company be placed in liquidation at the next creditors’ meeting.
But he said it would be in the creditors’ best interests for the meeting to be adjourned for up to 45 business days to enable the administrators to deal with issues surrounding the remaining 4,500 items of stock and the securities claimed by 20 secured creditors.
Secured creditors include Ingram Micro owed $1.6m, Dicker Data ($3.3m), Synnex Australia ($2.7m) and Leader Computers ($3.6m).
“These creditors have conducted inspections at the company’s warehouse and have identified some of the stock that is subject to their securities,” Mr Resnick said.
“We are currently in the process of verifying the secured creditors’ claims and reaching an agreement with the secured creditors on the allocation of the stock subject to the secured creditors’ securities.
“We are also currently in discussions with these creditors in relation to the sale and/or the collection of the secured stock to offset the creditors’ debts.
“After the realisation or collection of the stock subject to these creditors’ securities, the balance of the debts will be considered as unsecured claims against the company.”
The administrators said their investigations revealed that $500,000 of the sale proceeds were paid to Pelorus Capital to discharge the registered security against the company’s assets.
They said it was their preliminary view that the sale of the company’s business and assets to digiDirect was “entered into at arm’s length”, meaning it was made independently and fairly.
“Nevertheless, a liquidator, if appointed at the forthcoming meeting of creditors, will conduct further investigations into this aspect,” Mr Resnick said.
Mwave previously said in a statement that they would continue to trade from their Lidcombe headquarters in Sydney for the time-being before eventually transferring operations across to digiDirect’s headquarters, also in Sydney.
Consumer electronics business digiDirect – which is privately held and was founded by Shant Kradjian in 2006 – snapped up collapsed industry giant Booktopia last year.
Mwave was contacted for comment.
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Originally published as Online tech retailer Mwave probed for insolvent trading amid $30m collapse
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