Norman O’Bryan, the most prominent of the lawyers, has significant family connections to Melbourne’s legal circle.
It is the latest blow for investors, who have been battling for nine years for justice.
Don McKenzie, a long-time representative of Banksia investors, said the bankruptcy declaration of Mr O’Bryan and Michael Symons was yet another blow.
“Their actions are part of the reason that the Banksia clients have suffered for so long — the very people they were supposed to be representing and working for,” Mr McKenzie said.
“These high-powered legal professionals had a paramount duty to the court and an ethical and moral duty to their clients (the Banksia account holders) with overarching obligations not to mislead or deceive.
“One can only wonder how justice is delivered when these former legal practitioners are able to avoid their penalties in this manner. Where is the justice?
“Our faith in the legal fraternity has been seriously questioned.
“We can only hope that the Director of Public Prosecutions conducts a full investigation and brings charges against anyone responsible for wrong doing.
“It has been a long, drawn-out saga for account holders, now over nine years, and to get so close to winding up the Banksia collapse and be hit with this issue is soul-destroying.”
Mr McKenzie said the committee representing the account holders remained hopeful the liquidators would be able to negotiate insurance settlements that would see a final payment made in the coming months.
As reported by the Herald Sun this week, Mr O’Bryan — a barrister at the centre of a fraudulent scheme — declared bankruptcy in late October, listing himself as unemployed.
A Supreme Court ruling only weeks ago declared Mr O’Bryan and four other lawyers “engaged in egregious conduct in connection with a fraudulent scheme” when they tried to charge Banksia investors $19 million in legal fees.
The court ordered Mr O’Bryan and four other lawyers to pay back a large portion of the $19 million in legal costs they had charged the investors.
The Herald Sun reported that the multimillion-dollar legal costs related to a class action centred on the collapse of the non-bank lender, which was settled for $64 million in 2018.
Mr O’Bryan and fellow barrister Mr Symons were also ordered to be removed from the roll of persons admitted to the legal profession.
Mr Symons has recently declared himself bankrupt as well.
It is an enormous downfall for Mr O’Bryan, who had been a lawyer of choice for the Australian Securities and Investments Commission.
Mr O’Bryan belongs to a family with strong connections to the Victorian judicial system.
The case has been referred to Victoria’s public prosecutor for further investigation.
The federal government is pushing to introduce new laws to clamp down on the profits generated by the class action and litigation funding sector.
Kyabram-based Banksia collapsed in 2012, freezing some $660 million in funds deposited by almost 16,000 mainly rural retirees.
The downfall of Banksia sparked a round of fresh collapses in the non-banking sector.
It also highlighted the gulf between heavily regulated banks and privately owned investment houses, which engage in bank-like activities, but whose deposits are not guaranteed by the government as they are not authorised deposit-taking institutions.
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