The co-founder of Storm Financial, Emmanuel Cassimatis, has launched a media blitz, blaming the Commonwealth Bank for panicking and causing Storm clients to lose hundreds of millions of dollars.
Cassimatis, who has not faced the media since Storm fell into receivership on 8 January, conducted several media interviews yesterday after hiring a public relations firm to represent him.
He stayed firmly on message throughout the interviews: blame the banks, not us.
A vast number of Storm clients were advised by Storm to use margin loans as a way to turbo-charge their investment returns. Many of these margin loans were taken out with Colonial Geared Investments, a subsidiary of Commonwealth Bank.
Cassimatis claims CBA should have acted quicker as the portfolios of Storm clients were decimated by the financial crisis. He says margin loans should have been called in when the debt-to-value ratio of the loans hit 90%. Instead, Cassimatis claims, CBA waited until the loans reached a point where they fell into negative equity.
“”My finger points squarely at the Commonwealth Bank,” Cassimatis earlier told the Nine Network.
“The cause of what has happened is where they dropped the ball.”
He told The Australian that CBA lacked the personnel or the systems to handle the volume of margin loans from Storm clients.
“On the 20th of November, the data caught up with them, they had a panic moment and they sold everyone out, crystallising negative equity, destroying the portfolio of investors.”
CBA and other banks are likely to face legal action on behalf of a large group of former Storm clients. Law firm Slater & Gordon already has more than 250 Storm clients signed up to its class action and will hold a meeting in Townsville tonight to marshal more support.
But a spokesman for CBA says that it was not involved in any way in the provision of investment advice. He also says Storm was responsible for managing its clients’ margin loans until 9 December, when CBA’s subsidiary Colonial Geared Investment became concerned with the state of Storm clients’ margin accounts.
“After CGI contacted these Storm Financial customers, it became apparent that the customers were not aware of their financial position or the status of their margin loan,” a CBA spokesman says.
“The objective of CGI in directly contacting the Storm Financial customers whose loans had fallen into margin call was to advise the customers of their position, determine the best way forward and then work with them to resolve any problems.”
Cassimatis has denied that Storm gave inappropriate advice to its clients or encouraged them to take on too much risk.
“The advice that we were giving was conservative and it was sober,” he told ABC Television.
“We are devastated – absolutely, totally devastated. I feel a huge moral responsibility. You know, our clients trusted us implicitly. We trusted the system. We trusted all the players in the system. We trusted the bank. It went horribly, horribly wrong.”
- “We’ve lost money too” – Storm Financial founders break silence
- Queensland’s Storm Financial Group under pressure
- Storm Financial collapses into administration
See also the feature Five lessons from the collapse of Storm Financial