THE Sydney Kings have been trading for more than two years while insolvent, prompting the frustrated liquidator of the failed basketball company to start seeking warrants for the arrest of the company owner, Tim Johnston.

The elusive Mr Johnston is also under attack from his Perth-based business partner, Ross Graham, who said yesterday he had invested and loaned Mr Johnston and his Firepower company $20 million over the past 18 months. Mr Graham, who made his money in mining products, is the largest single creditor chasing Mr Johnston.

Mr Graham said Mr Johnston had prevented him from restructuring the company, and he was pursuing all legal avenues to recover his debts.

Mr Johnston has avoided authorities. Last week he was holed up in his luxury waterfront Asmara villa in Nusa Dua, Bali. He partied with friends at the villa last week, but yesterday it was deserted, and there was no word on when he would return.

The spectacular villa - the most private in a complex of eight sitting directly above the beach - has its own pool and staff including a butler, but is used by Mr Johnston only five or six times a year.

Asmara's privacy makes it popular with the jet-set. Guests have included Mel Gibson.

Mr Johnston's villa is worth more than $1.5 million. To rent a less salubrious villa in the high-security complex sets visitors back about $1500 a night.

While Mr Johnston's villa has just been extensively renovated, creditors, including the Kings players owed $250,000, scramble for leftovers.

A person claiming to be representing the NBA team the LA Lakers made tentative inquiries yesterday about buying the Kings. Three separate groups of people

have registered interest in buying the sports team, but they have only until June 30 to complete a deal. Prospective buyers have to be cashed up. The NBL is demanding proof of at least $1 million in the bank, payment of $200,000 for the franchise licence, and the money to pay the players.

As well, the Supreme Court-appointed liquidator, Nick Crouch, is offering the sale of the Sydney Kings name for an offer of around $100,000.

Mr Crouch confirmed yesterday that the Kings had been losing money for a significant period of time. He told the Herald the company had been trading while insolvent. . "The directors are personally liable for the debts after we establish the point they became insolvent and we will be exercising our rights to recover that money from those directors," Mr Crouch said. "We have applied to [the Australian Securities and Investments Commission] because the directors have not complied."

Mr Crouch indicated that it may take a fortnight before the warrants are issued because of legal paperwork.

Mr Johnston was a director of Sydney Kings Syndicate Pty Ltd.

"We are securing the books and records and seeing what information the directors had," Mr Crouch said. He was also preparing to register a caveat on the properties of the directors. Mr Johnston owns a $4.275 million canal waterfront home on the Gold Coast as well as the Bali villa. He sold Perth's most expensive house, a Moroccan-themed mansion, for $16 million last year.

As well as debts to the Tax Office of $580,000, the Kings owed CGU Insurance $130,000 for insurance premiums. It is understood the players completed an entire season without insurance coverage.

The only assets of the Kings are two portable basketball courts, office equipment and basketball equipment, including signed basketball singlets. Mr Crouch said he would organise a charity fund-raiser to sell the paraphernalia to raise money for the creditors.

Meanwhile, Mr Graham revealed that he invested in Mr Johnston's company, which distributed the liquid fuel conditioner throughout Australia and the Pacific.

Mr Graham said he unsuccessfully proposed a rescue plan to the Firepower board of directors, under which equity investors would have retained an economic interest in the company. "Our recent investigations into the Firepower group have revealed that any such rescue proposal may have been unenforceable due to the complexity of Firepower's structure and the multiple, opaque jurisdictions where the companies are registered," Mr Graham said.