The Federal Court of Australia has ordered Merlin Diamonds LIMITED to be liquidated on insolvency grounds following an application by the Australian Securities and Investments Commission (ASIC). Mr. Salvatore Algeri and Mr. Timothy Norman of Deloitte Financial Advisory Pty Ltd were appointed as liquidators.

In making these orders, Judge OBryan ruled that "the relevant financial metrics show that Merlin is currently insolvent: the company has sustained losses over the past several years; No income or major expenditure; The amount it currently owes to creditors includes debts to employees and the Australian Taxation Office; The company's working capital to quick assets ratio is below 1 and its net assets excluding the value of its mining facilities are negative."

Judge OBryan found there was sufficient evidence to show that "the company does not have a realistic prospect of raising sufficient cash or readily realisable assets to meet its current outstanding liabilities".

Judge OBryan ruled that the situation at Merlin had become so unsatisfactory that it was necessary to appoint a liquidator for Merlin to protect shareholders and creditors. The judge also ruled that it was in the public interest for an independent expert and court officials to continue to investigate Merlin's affairs and take appropriate action to remedy breaches of the Corporations Act by its current and former directors.

ASIC's investigation into Merlin is ongoing.