Illustration: Matt Golding.
A network of underworld figures and associates have used a licensed finance business as a front to run a loan sharking operation that charges desperate borrowers interest rates of up to 792 per cent.
The firm, Capital One Securities, is owned and run by former bankrupt Tom Karas, who was accused by the Purana anti-gangland taskforce of laundering criminal proceeds on behalf of the Mokbel drug empire.
Karas' control of the company seems to be in contravention of finance industry regulations, which could now be the subject of a review by the Australian Securities and Investments Commission.
Despite links to organised crime and a history of financial impropriety, Karas was granted a national credit licence by ASIC in 2011 after being deemed ''fit and proper''.
He has held the licence despite the Supreme Court ruling he owes $47 million to the Tax Office and freezing his personal and business assets as suspected proceeds of crime.
Karas and his long-time business partner, brother-in-law Nick Meletsis, have been under investigation over allegations they hired outlaw motorcycle gangs and underworld enforcers as debt collectors.
Capital One Securities controls up to $4 million in funds that are lent to desperate borrowers on terms as short as one month at exorbitant interest rates. For one loan, Mr Karas charged 63 per cent interest when it defaulted.
The source of the money - which is also under investigation by the ATO - has included convicted drug dealers such as Shane Charter, the biochemist known as ''Dr Ageless'' who is at the centre of the Essendon supplements scandal.
Other financiers for Karas' moneylending ventures, which have been operating under various names since at least 2005, have included convicted drug dealer Horty Mokbel, former Carlton Crew boss Mick Gatto and his business associate, John Khoury.
''The lender-clients of COS come to COS by word of mouth, relying on my personal reputation,'' Mr Karas said in an affidavit filed in ATO court proceedings.
In 2012, Karas arranged a one-month, $750,000 loan from Charter to the operators of failing music festival Supafest, who were charged 15 per cent interest a month.
That ballooned to 20 per cent a month - the equivalent of up to 792 per cent a year, compounded - when the borrowers went into default, according to loan documents filed with the court.
In another deal, Capital One Securities charged a $40,000 ''opportunity'' fee on a two-month $450,000 loan that left the borrowers owing more than $1 million after they defaulted and were slugged with the final bill a year and half later.
A source said the interest repayments were often collected weekly in cash and a running tally kept on a whiteboard in Karas' offices.
Under the credit licence, Karas has never been authorised to act as a finance broker, but he has pushed aggressively into this area after the funds to make his owns loans dried up when the ATO froze his personal and business bank accounts.
Fairfax Media believes ASIC could review Karas' licence following queries about his suitability and allegations he has routinely breaches its conditions.
ASIC said there had been ''no grounds'' to refuse Karas a licence in 2011. ''We note that the civil judgments referred to may raise some issues about whether these licensees are fit and proper persons to engage in credit activities,'' a spokesman said.
It is believed that Karas did not report the ATO-related court judgments made against him as is required by ASIC regulations.
Also it is likely the ATO will have fresh questions for Karas over undisclosed income from his moneylending operation contrary to sworn affidavits made to the Supreme Court.
Karas has claimed Capital One Securities only received a ''brokerage fee'' for arranging the deals. ''Once the loan is made, Capital One Securities receives no further income from the transaction,'' he said.
But documents show Karas also received 25 per cent of the interest repayments on a loan made in 2010.
Karas and Meletsis have threatened Fairfax with defamation proceedings. Mr Gatto declined to comment. Mr Khoury said he no longer did business with Karas.