A Melbourne gold bullion trading company has been ordered into liquidation after a Supreme Court judge rejected a bid to prove it was backed by a $13.7m offshore fortune.
South Yarra-registered World Digital Gold Bullion (WDGB), formerly known as Quantum Metal Bullion, was wound up last week over unpaid debts totalling more than $1.5m.
Gold bullion is high-purity physical gold, typically traded as bars or coins, that is valued for its raw metal rather than as a collectable.
The collapse comes amid revelations that previous bailout funds had been diverted into a foreign bank account, and that the company was operating in violation of Australian corporate law with a sole director living in Malaysia.
The company, which had $61,088 left in its bank account, tried to convince the court it was solvent by pointing to a $2m “loan facility” from its US-based sister company, Quantum Metal Recovery Inc (QMRI).
WDGB claimed QMRI was well-funded, backed by more than 124 million shares in ASX-listed Besra Gold Inc, worth $13.7m.
But Associate Justice Steffensen rejected the defence, revealing the shares were already tied up as security for other international loans.
The court found QMRI had committed “events of default” on its loan agreements by pledging the exact same shares as collateral to multiple different lenders and breaching warranties.
One of those lenders, High West, had already reached its “maximum funding capacity”, leaving QMRI unable to draw further funds at that time.
Detailing the unexplained money trail, the judge highlighted that previous loan advances were never paid to QMRI, but instead diverted into a Malaysian bank account held by a different entity.
“There is not, for example, an intercompany loan indicating that another entity in the Quantum Metal group has been loaned the advances,” Associate Justice Steffensen said, ruling she was not satisfied the bailout funds were “genuinely and realistically available”.
The court also found the company’s sole director, Khong Soon Lim, lives in Malaysia, flouting the legal requirement that an Australian company must have at least one resident director.
The winding-up application was first commenced in November by tax and accounting services firm Chase Melbourne, before being taken over by business AWD Alliance, alongside a group of supporting creditors associated with a dumped former director of WDGB, Kenny Lee.
These supporting creditors are listed as being collectively owed over $900,000.
WDGB asked the judge to make a special exception and let the company stay open, arguing it needed to survive to wage a Federal Court lawsuit against Mr Lee and the creditors, claiming they engaged in deceptive conduct and the debts were invalid.
But the judge ruled that letting the company continue would only rack up more bills for third parties, with no guarantee they would get paid.
WDGB has now been handed over to an independent liquidator who will take control of the company to recover funds for creditors.
WDGB could not be contacted for comment. Its website is not operational.