On Friday it seemed that the lenders to Opes Prime, ANZ Bank and Merrill Lynch, were dumping stock they held as collateral at huge discounts to recover the $1 billion they are owed.

Brokers reported that big lines of banks and medium cap stocks were being flogged and that institutions were enjoying what amounted to a garage sale. Shares in Hedley Leisure & Gaming Property Fund were placed in a trading halt after an off-market transaction went through at a 50 per cent discount, apparently as a result of the Opes collapse.

However, last night an ANZ spokesman told Business Spectator: “Average discount to stock sold on Friday was about 2 per cent. No stock was sold by ANZ at a 40 per cent discount (in fact not any discount remotely near that). We are committed to taking time to complete the sell down in an orderly way to ensure we obtain fair value.”

Merrill Lynch could not be contacted this morning, but now there is some uncertainty about what exactly is going on with the pledged assets of Opes.

On Friday ANZ appointed Chris Campbell and Sal Algeri of Deloittes as receivers, following Opes’s appointment of John Lindholm of Ferrier Hodgson as voluntary administrator.

The Deloittes team take precedence over Ferriers until the secured assets are realised and ANZ has got its money back.

In effect Lindholm is acting for the unsecured creditors of Opes, a group that largely comprises of its clients, whose debt consists of what they thought were their own assets.

Under the Opes margin loan contract, the clients assigned full title to all their shares to Opes, which in turn passed title to ANZ and Merrill Lynch. The clients then become unsecured creditors for what they thought was their equity in the investments.

On Friday John Lindholm would have thought he was watching the residual value for those clients/unsecured creditors being blown up by the discounts at which stock was being sold by the secured lenders.

The loan to value ratios in the Opes lending arrangements are believed to be around 70 per cent, so a 30 per cent discount on the sale of the collateral, on average, would mean unsecured creditors would get nothing.

Given what’s at stake for Opes clients, either ANZ and Merrill Lynch should immediately clarify what they are doing, and/or the Australian Securities and Investments Commission should supervise the sale of the collateral.

At least ANZ has now confirmed via Business Spectator that it is not dumping stock.

The other mystery around Opes on Friday that was responsible for lots of swirling speculation is whether its collapse was due to fraud.

There were clear suggestions from the regulators and the receivers that it was. ASIC has a “special team” investigating and the ASX suspended the firm’s licence because of “irregularities”.

There were also a variety of reports about the position of managing director, Laurie Emini – that he had been “sent home” a week ago, and alternatively that he had gone on “stress leave”. On Friday ASIC obtained a seven-day travel restraint order against Emini.

Sources close to the situation told me over the weekend that the collapse of Opes was caused by the failure of several clients to meet margin calls before Easter totalling around $100 million.

This immediately put Opes in breach on its capital adequacy ratios, which is the irregularity referred to. That is, two or three clients had been allowed to build up such incredibly large positions that their failure to meet a call destroyed the broker.

The broker’s internal control systems failed to pick up the breach — it was apparently discovered by two directors, Julian Smith and Anthony Blumberg.

It is further understood that none of these margin calls involved related parties to Opes.

However the Financial Review reported this morning that one of the companies placed in receivership on Friday was a 50/50 joint venture between one of Opes’ major clients, Sydney lawyer Chris Murphy, and Laurie Emini.

None of this means fraud was or was not involved: Deloittes’ Chris Campbell said on Friday it is too early to say whether money had been “stolen”.

However if individual clients are being lent that much money on high loan to valuation ratios, and the back office systems are in such a mess that warning bells were not rung, you don’t need fraud to break a broker.