Oct 30, 2010 (LBO) – Investors in Sri Lanka’s failed high-yield financial firms have lost more money than they should have by delaying liquidation and pressuring someone else to put additional cash to cover their losses, a legal expert has said. Neomal Gunewardene, partner of Nithya Partners, a law firm, said depositors in failed financial firms have acted on some fundamental assumptions which turned out to be wrong.
Gunewardene was also involved in an expert group that helped resolve a liquidity crisis at Seylan Bank, a large commercial bank, under Central Bank direction.
“I think that a lot of people seemed to work on the assumption that there were large amounts of money which could come in from outside which could settle all depositors at the click of a button,” he told a group of senior executives at the LBR-LBO chief financial officers forum.
“So somebody had to just press a button and billions of money would pour into the system and all depositors would get settled.
“‘Therefore what we need to do is we should pressurize those individuals to press the button.’ They kept pushing the button but nothing has come in.”
In the case of Golden Key, depositors also evaded taxes and some expected a g