A “Notice of administrators proposals”, published on Companies House last week, stated that in early March it was established that “over £700,000 had been misappropriated” from the company.

The report added that: “For legal reasons and an ongoing police investigation, no further details can be supplied at this stage”, although Simon Parker, a partner with the administrators Antony Batty & Co confirmed to TTG that an ex-employee was arrested in relation to the findings “some weeks ago”.

Market Harborough-based tour operator Diamond Shortbreak Holidays ceased trading on March 16 with Abta citing “financial difficulties”, resulting in the redundancy of all staff – 52 in the UK and 26 in South Africa. The following day Arena Travel announced its acquisition of The River Cruise Line and Diamond Rail Holidays brands, with the latter now rebranded. The Diamond Holidays brand was not taken on.

The administrators’ report for the collapsed Diamond Shortbreak Holidays stated that fines, legal fees and interest charges associated with the alleged “misappropriation” brought the company’s total deficit to £896,000.

This, coupled with a “large German VAT liability” discovered at the end of February brought the company £1.2 million into the red.

The report added that on discovering the full extent of the issues, the directors of the business sought advice. Antony Batty & Co “concluded that the company was insolvent” as it would not be able to meet “current and projected liabilities”. Parker described the money lost through the alleged fraud as playing “a major part of the operator’s demise”.

The administrators’ report added that in 2016 costs were “very well controlled” and the Diamond Shortbreak Holidays made a small profit of £362,451 in that year.

Parker said efforts continued to sell its assets. “There will be a payment to unsecured creditors, but first the banks and preferential creditors will be paid,” he said.

The only known preferential creditors are the staff, with another 619 unsecured creditors owed £9.42 million with an estimated deficiency of £8.97 million.