The collapse of Soundwave this week was the final chapter in a remarkable story of the rise and fall of its promoter AJ Maddah - a man who just over two years ago was named the most powerful person in the Australian music industry.

Maddah's company is now in administration with debts of $28 million and his loyal fans are demanding to have their tickets refunded.

The collapse could also mark the end of an era for large touring music festivals in Australia, industry figures say, with the tight-knit group of festival production companies who have lost money on Soundwave unlikely to advance credit to promoters of future large festivals.

With the enigmatic figure at the centre of the story, Arash 'AJ' Maddah, gone to ground and not taking calls, Hack has obtained a confidential creditors report and spoken with those owed money to sketch together the story of why Soundwave failed.

"He flew too close to the sun and he melted," says Julius Grafton, the publisher of industry magazine CX, and the first to report on details of the creditors report.

Others describe the financial arrangements as a "house of cards" that collapsed when contractors began demanding payment upfront, instead of on credit.

It is not clear where the ticket money has gone or if ticketholders will get their refund.

Industry fears the collapse of Soundwave will have broader repercussions - breaching the trust of contractors and the public and making it harder to hold music festivals.

'There has been a massive breach of trust'

It was a steep fall. The report tells of a music promotions company that turned a $7 million profit in 2013 and recorded a $5 million loss in 2014.

The 2014 festival was the turning point, according to Andy Gayler, who runs an Adelaide-based sound company that began working with Maddah in 2008.

Soundwave began in Perth in 2004 (Good Charlotte headlined), spread to Brisbane and Sydney in 2007 (Blink-182 and Deftones), and then expanded further to Adelaide and Melbourne the following year (The Offspring, Incubus). In 2013, the year Maddah was named the most powerful man in Australian music, the festival reported revenue of $63 million.

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Whatsapp Soundwave Festival promoter AJ Maddah.

The company was unable to fully pay all its contractors for Soundwave 2014, Gayler says.

"In previous years we were paid immediately," he says. "But we had a fair idea in 2014 that something was not right. We thought, OK, it's getting too big, it's getting out of hand."

"A lot of people had a lot of good years out of Soundwave.

"But we thought the gravy had run out."

Neale Mace, who runs a stage-construction company based between Newcastle and Sydney and is owed more than $80,000 by Soundwave, said there was disquiet among the production community after 2014.

"But we thought we better stick with him. We need successful promoters."

He says Maddah was able to trade on his reputation built over years of promoting successful festivals to cobble together the 2015 festival. But the cracks had begun to appear. That year a crewing company waited outside a Soundwave festival, refusing to deliver equipment until they had been paid, according to the owner of a major Sydney production company.

"Once the jungle drums start beating and everyone demands their money up front, then it's all over," the production company owner told Hack.

"We felt we can't afford to carry the festival. We need our money."

Production companies demanding money upfront was unusual. Typically the companies would work on credit and be paid only after the festival with revenue from the box office. This arrangement reduces the amount of capital a promoter has to stump up to hold a festival but increases the risk-exposure of the contractors.

"[Production companies] carry all the risk," says Gayler. "But you can't put a festival on without credit."

Gayler's company, Andy J Sound, is owed about $34,000 by Soundwave. He says the company was not paid after the 2014 festival and only agreed to work on the next year's festival in order to recoup the money from 2014. He say he struck a special deal with Maddah to be paid in advance and recoup some of the sound company's 2014 losses.

"We could see the writing on the wall," he said. "We had a cautious approach to 2015. You would be a fool it you didn't."

"O thank my lucky stars. Others would be owed more."

He says the 2014 festival marked the end of easy credit arrangements between promoters and contractors. "There has been a massive breach of trust."

"It's the end of an era."

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'Significant decline in ticket sales'

In January 2012 Big Day Out Promoter Ken West labelled Maddah as a "financial anarchist" - Maddah responded by tweeting, "That is awesome. I am putting that on my email signature-line."

Over the next few years Maddah would make a series of investments that culminated in his company being placed in voluntary administration in September 2015 with debts of $26 million to 186 creditors.

In 2012 Maddah invested in Billy Hyde Stage Systems - a company that rented equipment to festivals and reportedly turned over $2 million per annum. According to Grafton, other promoters started hiring equipment from other companies in order to not support Maddah, who was their competition.

Billy Hyde will now be sold for $600,000 to recoup Soundwave debts.

In September 2013 Maddah paid $5 million for West's stake in the long-running Big Day Out festival. Months later he sold the stake for $1.

Aside from the bad investment decisions, Maddah also made mistakes managing the business, according to Deloitte. Its report to creditors cites "a lack of internal control processes to monitor costs" and mistaken accounting practices that meant the company was paying more tax than it should have.

In the 2013-14 financial year Maddah's company lost $12 million.

Why this happened is disputed by Maddah and Deloitte. In the creditors report, Maddah is reported to blame the loss on the Big Day Out Investment. The Deloitte analysis disagrees:

"Instead, the loss appears to be attributable to a significant decline in ticket sales."

From 2013 to 2014 ticket sale revenue fell by $23 million. It would appear Soundwave failed to break even in 2014. If this is the case, the festival may have been doomed even if Maddah had not made loss-making investments elsewhere.

According to Gayler, it all comes back to declining album sales. He thinks because bands are earning less elsewhere they have been demanding more money for live performances. "In the current climate it's very difficult to put events on," he says, citing South Australia's Gorgeous Festival, which he says was cancelled because ticket revenue could not pay for what the acts were demanding.

"I think it's become impossible to hold big festivals."

'He'd just run out of credit with agents'

Grafton disagrees. "The festival itself should have made money. He had the golden goose and he strangled it."

In any case, Grafton says, the 2013-14 financial year loss precipitated a domino effect that led to the festival's collapse two years later. Because of the shortage of money, bands were not paid for performing at the 2015 festival, and this made it harder to book big name acts for the 2016 festival.

The list of creditors include 52 bands; apparently most of the acts who performed at Soundwave 2015 including headliners Soundgarden (owed $2.1 million).

The lack of big-name bands led to softer ticket sales.

"There are only five power agents in the world and they are mostly based in Los Angeles," Grafton says. "And they do talk to each other. The sheer amount of unpaid acts after 2015 meant nobody was going to do any deals for next year without full payment upfront."

"He'd just run out of credit with all the agents."

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Whatsapp The crowd at Melbourne Showgrounds for 2015's Soundwave festival. Moonee Valley mayor Narelle Sharpe says she does not mind heavier music.

'We were convinced the 2016 festival was not going ahead'

In late September Maddah changed the name of Soundwave's operating company twice in two days. Days later it entered voluntary administration. The next week a handful of the 154 creditors met at Deloitte's Paramatta offices and were told the company had few tangible assets.

Maddah did not attend the meeting.

About a fortnight later Deloitte told creditors the best way to get their money back would be ticket revenues from the planned Soundwave 2016 festival. Maddah estimated the festival would make a maximum profit of $6.5 million. Deloitte proposed 50 per cent of the profit would go to the creditors. Later that month creditors approved this plan as a Deed of Company Arrangement (DOCA).

"The DOCA was a joke but there was no point not signing," says the anonymous head of a major Sydney production company.

Gayler thought the same. "We were convinced the 2016 festival was not going ahead. But if we wound him up we would get nothing."

According to Gayler, the DOCA had the unintended consequence of ensuring the festival would never go ahead. It removed any question that contractors would demand their money upfront, rather than as a share of ticketing revenues. Without credit, Maddah would never have the money to hold the festival.

Soundwave tickets went on sale on August 21. "As the date of the festival loomed nothing happened," says Neale Mace. "It just didn't look like it was there.

"It didn't have the hype and vibe."

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Whatsapp Heavy metal supergroup Killer Be Killed play at Melbourne Showgrounds during Soundwave 2015

Ticketing revenue 'given away already'

The Deloitte report sent to creditors contained a bombshell. Buried in the 27-page document was the following statement:

"We have identified ticket sales totalling $1.9 million in relation to the 2016 Festival, of which approximately 80 per cent of funds collected were released to [Maddah] prior to our appointment to facilitate deposits in relation to the 2016 Festival."

Under the Live Performance Australia (LPA) voluntary code of conduct ticketing money is held in trust and released to the promoter after the event. The code was set up to ensure if an event was cancelled ticketholders would be refunded. It also meant a promoter could contract a company on credit and guarantee them a share of the box office revenue.

"Right up until the Deloitte report everyone in the industry assumed ticket funds were sacrosanct," Grafton says.

Another industry figure put it this way: "I thought it was illegal".

The agency in charge of Soundwave ticketing, Eventopia, is not a signatory to the industry code of conduct. Its associated company, Ticketek, is a signatory. Often the two companies are conflated. In the past, Soundwave tickets have been sold through Ticketek. This week Maddah tweeted: "I'm waiting on Eventopia/Ticketek to make their decision. We cannot hold festival without their support."

After the festival was cancelled on Thursday this week, Eventopia sent an email to ticketholders:

"In line with our ticketing sales agreement, the Festival Promoter is responsible for all ticketing funds that were advanced, and is directly liable to all ticket purchasers for issuing customer refunds."

The next morning, the Eventopia general manager told triple j the ticketing agency had sent a letter of demand to Maddah requesting the return of the money.

But it may be too late. It is not clear where this money has gone. If it has been spent on deposits for bands - which is some suspect - then it may not be recoverable.

This raises questions about culpability and what was foreseeable.

Was it foreseeable the festival would be cancelled and the people who had spent more than $170 on each ticket would not be able to get their money back? Should tickets have then been sold?

"You've now got a cascading effect with people who are not going to trust ticketing agencies no matter which one they are," Grafton says.

"The number one wash up of this is the punters are about to lose all confidence in ticketing."