Two of the directors of Malta Cross Financial Services Ltd, Stephen Spiteri and Robert Cutajar, said today that another director had admitted to them that there was an undeclared €6m shortfall in clients' assets, and they immediately notified the MFSA and the police.

The directors were replying to a judicial protest filed by 14 investors who earlier this week demanded a return of the capital they had invested with the company.

The directors said that in the days before August 7, when the MFSA suspended the operations of the company, Jean Claude Bugeja, another director (who was forced to resign by the MFSA) had admitted to them that there was a shortfall of some €6m in clients'  assets.

This was not reflected in the company's books. Mr Bugeja was responsible for this shortcoming, the directors said.

The situation leading to this position started in 2008 when the company was known as Island Financial Services Ltd, and, even before they became directors.

They had each been encouraged to take a five per cent stake in the company and become directors. But as soon as they realised that there were irregularities, they reported the issue to the MFSA and the police.

They said their offices were now under the jurisdiction of the MFSA and the police and they had no access to records.

They also asked how the investors expected that their capital was guaranteed.

The two directors said they never handled the investments of these 14 investors and it was only Mr Bugeja who did.

Lawyer Stefano Filletti filed the counter-protest.