This is how John Polson tells the story: He was in New York when he learned the world's largest short film festival, the festival he had founded 23 years earlier, somehow did not have the money to stage the event this year. There was a "six-figure" shortfall. The one-day Sydney event cost between $1.5-2 million. They were one month out. He had no idea where the money had gone. He issued a statement: the festival was not going ahead.

"We raised well over a million dollars towards Tropfest last year and I got an email in early November saying we had not enough money to move forward with the event," he told Hack.

"The money is gone, I don't know where it is."

"I don't believe Michael Laverty did the cliche thing of going off and spending it in the Bahamas but clearly something went wrong."

"There was massive, massive financial mismanagement that went down with this event and it's terrible and I'm trying to fix it."

Michael Laverty is the Tropfest managing director. He and Polson had been close for many years but since November have exchanged only a few occasional text messages, according to Polson, who is reportedly suing Laverty's company. Laverty has proved difficult to contact and has given no media interviews since the festival was cancelled. Only months earlier, mid-year, he spoke at Sydney's Vivid festival.

According to Polson, the allegation of massive financial mismanagement is backed up by documents, but he won't share these because of the court case. He also says he hasn't been given access to the festival's books. "I've been asking for that for a long time," he says. "There's a lot of very big questions going on."

In December, Polson announced Tropfest was going ahead again - on February 14. Since then he has been event-promoting. But the confusion over the missing money and the legal sensitivities around what he can and cannot say puts him in the awkward position of asking the public to back a festival that failed for unknown reasons.

Polson is not alleging the festival folded because of financial impropriety, but because of mismanagement. It's not clear what mismanagement, or how Polson can make this judgement. Laverty, according to his Vivid festival bio, is a "highly experienced business leader and entrepreneur with over 28 years in the fields of accounting, financial management, marketing and major event production."

"I'm a filmmaker," says Polson. "I'm not a marketing person, not an accountant."

The question remains: Why did Tropfest fail?

John Polson: "I think you should ask Michael Laverty some of these questions."

Tom Tilley: "Well he's gone to ground unfortunately."

JP: "I know, it's very unfortunate."

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Whatsapp Michael Laverty at Tropfest 2014.

'Over my dead body is this thing going away'

Tropfest famously began 23 years ago in a Kings Cross cafe. "It was me and a bucket and a couple of friends collecting gold coins," says Polson. As it grew it moved to a licence model, Tropfest Festival Productions, Laverty's company, owned the licence and looked after the day-to-day management. Polson was the frontman and promoter who looked after the creative elements.

At its peak, the summer evening festival drew almost 200,000 people to the Sydney venue, was broadcast on SBS2, and had a separate junior competition as well as a string of international spin-off festivals. It became the world's largest short film festival; seen as an important launching pad for young filmmakers. Baz Luhrmann described it as the film equivalent of a stadium rock concert.

Films and actors that made their break at Tropfest Billed as the world's largest festival of its kind, Tropfest attracts hundreds of entries and is watched by thousands.

News of its demise was met with bewilderment. The festival appeared to be as popular as ever. Even when contractors came forward and revealed they hadn't been paid, the "six-figure" deficit seemed out of proportion. Polson says he first became aware of the missing money around October. Then he learned the financial hole was bigger than he expected. He tried to "stumble through".

"When I got that terrible news there was a massive deficit in the budget exactly one month before the event happened, it coincided with the weekend I was meant to watch a shortlist of films," he says. "There was a very daunting amount [of money] we would have to fill, and I was also wondering how could we possibly be in this position.

"I decided I'm going to watch the films this weekend and let the films decide, and if at the end of the weekend the films are not as good as they used to be, maybe Tropfest has had its day and everyone is into some other digital revolution or whatever, maybe I should go, 'That was a great 23 years,' and let it slide."

"I sat down and watched those movies. There was about 70 on the short list. At the end of it I was like, these films, these young unknown filmmakers are just as strong and exciting and inspiring as they've ever been. By that Sunday night I said, 'Over my dead body is this thing going away. This has got to stay and I've got to figure out how I'm going to fix it'."

But passion alone could not save the film festival. On November 11, presumably a few days after that weekend, he announced the festival was over.

Skip Twitter Tweet FireFox NVDA users - To access the following content, press 'M' to enter the iFrame. TROPFEST PTY LTD announces the Dec 6 Tropfest event will not be taking place. Read the full statement here: https://t.co/crbTjg1q6R — TROPFEST (@TROPFEST) November 11, 2015

On December 6, the day the 16 Tropfest finalist films were to have screened at Sydney's Centennial Park, he announced the festival was going ahead again.

A white knight sponsor, CGU Insurance, came to the rescue - Polson hasn't said how much money it poured in, only that it was enough for the event to go forward again.

TT: "That's amazing the passion for the films is what saved the project at the end of the day, and a last minute corporate sponsor."

JP: "That helped."

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Whatsapp Spectators at Tropfest 2014.

'We invited Mel Gibson because he's an Australian icon'

Questions remains about Tropfest's long-term future, and these can't be answered until it's clear why the festival failed in the first place. It's also not clear how the festival brand has been affected, and whether fans will excuse the alleged mismanagement. Or whether the rise of internet video sharing, which allows young filmmakers to broadcast to millions, has made a curated film festival like Tropfest obsolete.

Skip YouTube Video FireFox NVDA users - To access the following content, press 'M' to enter the iFrame.

In late January Polson launched a crowdfunding campaign to raise $100,000 to hire financial advisers to develop a "sustainable business model".

He's also open to the idea of moving to non-profit status. "Will that open up funding that hasn't been previously available?" he asks.

The licensing model is gone and next week he'll announce a new partner coming on board to "help rebuild the way the thing works."

He's also announced further changes: the festival no longer asks for exclusive rights in perpetuity to the films it screened, and Polson says he's exploring whether it's legally possible to release rights to Tropfest's back catalogue.

"By the way [the rights] have made us $2 over the years," he says.

That exclusive rights issue is revealing - according to Polson it had been one of the main criticisms of the festival over the year. But he also says these rights didn't make any money - they only made $2 in all the years it operated. Why then did it take the shock of collapse before organisers considered changing an outdated and unpopular rights model? The model arguably belonged to a time when festivals controlled the means of screening new independent films; they no longer have this role.

"This is a social event," says Polson. "Not social media social but actually social - where people see each other, shake hands and give each other a hug. How many hours a day do you want to sit at home on your computer and tweet or whatever the hell it is? You want to come out and have a party and listen to some live music see some other people."

This week Tropfest announced Mel Gibson was one of the 2016 judges. This drew criticism from some the festival was out of touch with its target demographic - young people who maybe knew Gibson best for the controversy of his late career, including alcoholism and a series of racist, homophobic, and anti-semitic comments, rather than as the young post-apocalyptic survivor in the Mad Max movies. The new Mad Max didn't star Gibson.

"As a 15-year-old in 1980 I went to see Mad Max and watched it three or four times over," says Polson, defending his choice of judge.

"We've invited him because he's an Australian icon."

"What's happened to him in the last few years you'd have to ask him about."