Fincorp racked up so much debt that the only way it could survive was to keep raising finance from retirees.
The failed property lender kept issuing prospectuses for its high-yield debentures to cope with bank debts of $103.69 million, a creditors' report concluded yesterday.
"Fincorp relied too heavily on debt provided by banks, funds raised from noteholders and the eventual development and sale of the various properties," administrators KordaMentha said in the 177-page report.
"The Fincorp Group needed to raise large amounts of new debt to repay its existing debt and interest obligations and to fund development and other costs."
Fincorp collapsed in March owing $300 million.
Around 7000 secured noteholders are expected to get some money back after Becton Property Group bought nine of Fincorp's 10 properties.
In addition to an almost total reliance on external debt funding, the group's failure is attributed to poor accounting practices, misplaced and incomplete files and a lack of sufficiently skilled staff.
Several investigations are underway into the responsibilities of directors and third parties in the collapse.
The remuneration of former Fincorp boss Eric Krecichwost is under scrutiny.
So too is evidence of uncommercial transfers of shares and unfair loans.
"Krecichwost and associated parties received significant payments via loans, salaries, commissions, dividends and other payments," KordaMentha said.
In one example, the group bought a property for $1 million in south-west Sydney only to sell it two years later to Krecichwost's wife Tiffany for only $3.
Also being scrutinised are the roles of Fincorp's auditor PricewaterhouseCoopers and the trustee to the noteholders, Bendigo Bank-owned Sandhurst Trustees Limited.
In addition, reports prepared by Ernst & Young in 2006 about the financial viability of the group and insurance policies will be investigated.
Claims could be raised against the former directors for insolvent trading.
If dishonesty is found to be a factor, they face criminal charges which can lead to fines of up to $220,000 and five years in jail.
Fincorp's directors have rejected the claims.
Creditors will next meet on July 26 in Sydney.
