You could sue the auditors only and try to leave the company to...

You could sue the auditors only and try to leave the company to trade out of this mess. Their function is to pick up on exactly this type of problem in a company and they didn't.

Unfortunately, the auditors will undoubtedly counterclaim against the company for submitting false information during the audit process and then it becomes messy. KPMG have big pockets though so litigation funders will be looking at this situation licking their lips.

I think the question needs to be whether you believe the company can trade out of this situation or whether this fraud will be its death knell.

If we are looking at administration and possible liquidation, then the class action will attempt to recover some of the lost investment - it will be your only chance of getting something back. It will never be 100%, but a little of something is better than a whole lot of nothing. The fact is, it will be risk free because any claim will be funded, so there is no reason not to participate in an action in these circumstances. But don't hold your breath. It will take a long time to work any settlement back in to your pockets.

If it can trade out and you think in time, you will recoup your investment, then you have to think whether it is worth waiting it out and hoping in time that the value will return to the shares or whether you pressure the company in to a payout for the current losses and hope the action doesn't distract it too much from its core business - or hinder it financially.

The auditor will still be looked at for its contribution to the false statements, but the company will need to be a party and come to some form of resolution in respect of the artificial inflation in the share price for a period - prepare for lots of finger pointing. At the end of the day, there will be an insurance policy to respond to any claim, but it will be capped. That policy should also cover defence costs which is a dble edged sword - it will erode the payout pool from the insurer but also take some pressure off the company while the claim persists.

Also, only those who purchased shares in the last few years will be entitled to make a claim because it will be limited to a time when the market was in fact misled, being the time the fraud worked its way in to the accounts or when the company falsely reported its position to the market - so foundation investors miss out. By the looks of things I reckon the cut off date will be the release of the FY19 financials - but it might go further. The lawyers will do their best to expand the relevant period back as far as possible.

Given the disclosures so far there is little doubt a claim is available and Banton Group is one best in the business for bringing these claims so you are in good hands. I still think the best option is to get in touch with the company and try to avoid it all by settling on a small payout early and getting on with business.