America's Cup head slams 'sinister' fraud slur

America's Cup organisers said they were the victim of a "sinister" smear campaign Friday after fraud and spying claims prompted the New Zealand government to freeze public funding for next year's regatta in Auckland.

Team New Zealand (TNZ) managing director Grant Dalton said unnamed "people with questionable motives" were trying to tarnish the reputation of his organisation, which is running the event.

"It is a deliberate, sinister, and highly orchestrated attack which includes anonymous tip-offs, recordings and document leaks," Dalton said in a statement.

"'Informants' orchestrate unfair accusations, bypassing normal processes, and going straight to external authorities."

He has repeatedly denied any wrongdoing and complained this week his organisation had been infiltrated by spies, saying he had dismissed those involved.

Dalton said the allegations made to the government about misappropriation of public funds appeared timed to distract TNZ from its twin goals of defending the America's Cup and delivering the event.

"Everyone is asking 'what are their motives?" he said.

"We are getting increasingly clear views on this, but we won't stoop to their level today, our focus needs to be elsewhere right now."

The government said Thursday it was investigating "structural and financial matters" surrounding the race's organisation and would withhold NZ$11 million ($7.2 million) from TNZ's event management subsidiary until they were settled.

TNZ, a privately owned racing syndicate, won hosting rights for the 2021 America's Cup when it triumphed in Bermuda in 2017.

The New Zealand government and Auckland Council have poured a combined total of around NZ$250 million ($163 million) into the America's Cup, which dates back to 1851.

A letter from government officials leaked to the media this week said concerns included a NZ$3 million ($2 million) loan to TNZ that was "reclassified" for other purposes and the fraudulent transfer of funds to a Hungarian bank account.

The New Zealand Herald on Thursday said it had obtained a draft report containing further details but could not publish them because TNZ had obtained a court gagging order.

Dalton defended the tactic, arguing the document contained sensitive information.

"It will give competitive advantage to our on-water challengers during this and subsequent campaigns," he said.

"We have had to take all actions available to protect that information and our competitive position."

The staffers sacked by Dalton have told local media they are New Zealand contractors who regard themselves as whistleblowers, not spies.

Dalton vowed the controversy would not detract from yachting's most prestigious regatta.

"As a team, all we want to do is defend this America's Cup successfully in March 2021, and showcase to the world what an amazing country we have through a successfully run and broadcast event," he said.