Inside the demise of Zorzi Builders: Bitcoin, a legal battle and $12m of losses

A $10 million legal fight and seven years of losses helped sink luxury Perth construction empire Zorzi Builders, administrators have revealed. Administrators from Hall Chadwick were put into Mercedes Group, which traded as Zorzi and Grandwood Homes, in March after months of speculation. Creditors have claimed about $21m from the ruins, according to an administrator’s report issued this week. Hall Chadwick has recommended the company be liquidated — pending any last-minute rescue bid — bringing an end to nearly 70 years of history for the brand founded by Italian migrant Corrado Zorzi in the 1950s. His family exited the business in 2019. It is understood a potential deal to buy the company out of administration still remains possible, but has not yet been submitted. Zorzi’s fall marks the latest demise in WA’s building bubble, which has claimed hundreds of businesses. Yet the report to creditors filed with the corporate regulator shows administrators believe Zorzi’s trouble extended beyond cost escalation and lack of tradies. Ongoing losses, lack of capital and a major legal dispute brought severe pressure. The West Australian can reveal Zorzi has been in a secret, long-running and costly arbitration battle over a troubled building contract terminated in February 2020. Cooah Investments, led by developer Adam Lisle, is claiming almost $10m from Zorzi. Mr Lisle declined to comment. Administrators believe the builder has a potential counterclaim and could instead recover up to $3m. That decision is hanging in the balance as the arbitrator is expected to soon deliver a final call on the dispute. The Cooah fight was a drain on cash for a company struggling to keep its head above water. Zorzi posted nearly seven years of losses through what was a bleak period in the industry, marked by a pre-pandemic lull and then a dramatic stimulus-fuelled acceleration. Those pre-tax losses totalled $12m since the 2019 financial year. The company had debts higher than assets, generally seen as a financial warning bell, in 2016, 2017 and then since 2021. Those bells would have been sounding loudly in 2024 when Zorzi’s accountants did not sign off the financial report and as demands from creditors started to trickle in. Hall Chadwick reckons Zorzi was insolvent in June of last year. Further investigation will be needed to judge an insolvent trading claim of $5m and assesses potential unreasonable transactions. Directors will have defences, including that they believed they had locked in a loan deal which fell apart last-minute. Those directors moved to pump cash into the company in the final months. About $1m was injected by businesses linked to Zorzi boss David Reynolds, while the books show Nicola D’Ercole chipped in close to $800,000 in recent months. Also among the remarkable revelations was Zorzi’s holdings of cryptocurrency bitcoin. An “historical investment” into the digital token was sold in March 2024 for $56,000 — about six times the purchase value. Despite an ambition to keep Zorzi running through the administration and bring the business back from the brink, Hall Chadwick struggled to get workers onsite at its 18 home projects thanks to troubles with insurers. A liquidation would return only 7.4¢ in the dollar to unsecured creditors. A Zorzi customer — speaking on condition of anonymity — told The West Australian that defects on his home would cost as much as $600,000, far above the threshold covered by the home indemnity insurance scheme. “It’s very frustrating.” he said. “I’ve got a young family. I could’ve been living in this house years ago.” Work on the home started during COVID-19 and is still not complete, which the customer said created financial pressure and had an impact on his quality of life. “They’ve got a great reputation,” he said of the builder. “And it was a great company. “A lot of personal commitments, handshakes, they’ve gone back on.”