Failed mega prawn farm Project Sea Dragon will be forced into liquidation following a Federal Court ruling on Friday, officially ending a controversial major project that saw NT taxpayers fork out $56 million for the promise of more than a thousand jobs that never eventuated.

Liquidators from KordaMentha were appointed to wind up Project Sea Dragon – a subsidiary of Seafarms Group – and oversee the payment for legal costs of $13.9 million to construction company Canstruct.

Canstruct filed a lawsuit against Project Sea Dragon following the termination of their contract in April 2022.

In February, a court determined that the proposed $1.5 billion Project Sea Dragon had been insolvent since at least June 2020. The judge subsequently ordered the appointment of liquidators to oversee the winding up of the company at the time, but the company appealed.

Seafarms had been developing Project Sea Dragon, a proposed giant prawn farm on Legune Station, for over 10 years. The project, which was touted as able to produce 100,000 tonnes of tiger prawns annually and create 1,600 jobs, was granted major project status by the NT Government in 2015.

Governments invested heavily in the project’s road infrastructure, with the Federal Government contributing $63 million, the NT Government contributing $56 million, and the WA Government contributing $15 million.

However, an internal company review in March 2022 deemed it “not viable in its current form” due to significant risks related to its remote location and other environmental concerns.

Following leadership changes, the project was put into voluntarily administration in February 2023, after a costly contractual dispute.

Seafarms reported a net loss of $19.6 million for the 2023-24 financial year and sold some assets to mitigate the losses.

The project had become controversial for years after public money was pumped into developing roads and other infrastructure for a project that did not ultimately go ahead.

But some in government believed it would succeed, including former Labor minister Brent Potter, who the NT Independent revealed earlier this year had purchased 8,700 shares in Seaframs Group in June 2021, while a ministerial adviser to the minister responsible for the project, which raised concerns from national integrity experts about government officials using inside information to enrich themselves.

Records showed Mr Potter divested the shares last November – two days after he was made aware former chief minister Natasha Fyles was in breach of the ministerial code of conduct for not divesting her shareholdings in Woodside Energy – and at a massive loss, with records indicating he sold each share for $0.004, much less than the six cents per share he purchased them for during a capital raising drive in 2021.

The ABC reported on Friday that Canstruct hired several local businesses in Kimberley to carry out projects related to the prawn farm and its nearby workers’ accommodations, which were left in limbo.

Shire of Wyndham East Kimberley president David Menzel expressed doubts that any funds from the liquidation of Project Sea Dragon would ultimately be returned to the local contractors.

However, he expressed hope that the failure of the ambitious prawn farm would not deter future investment in the area, pointing to the infrastructure upgrades.

“I think the value of that road will come over time and it’s probably really helped to facilitate some development opportunities in the meantime,” he told the ABC.

He added that a significant piece of land on the NT side of the border is prepared for development into dry-land and irrigated farming operations after all the public funds injected into the area, “so I think we will see some real returns on that investment soon.”