Australia’s oldest newspaper, the Sydney Morning Herald, has lost control of parts of its priceless photographic collection after a cut-price deal with an American businessman to digitise the historic Fairfax archive went spectacularly wrong.

Some of the archive is now trapped in an Arkansas warehouse after the business tasked with digitising it was placed into receivership and is facing 10 lawsuits totalling more than $90m.

In 2013 Fairfax Media entrusted a digitising business called Rogers Photo Archive in Little Rock, Arkansas, with millions of newspaper photographic prints and negatives dating back as far as the 19th century – from the Sydney Morning Herald, the Sun-Herald, the Australian Financial Review, the Age in Melbourne and 72 New Zealand newspapers.

Rogers Photo Archive was going to scan and tag the photos in return for the right to sell the originals for a profit when the project was completed.

Fairfax executives argued it was a good deal because the cost of digitising its vast archives was prohibitive at $2 to $4 per picture, or an estimated $32m.

But Fairfax was unaware the FBI was investigating Rogers for sports memorabilia fraud at the time of the deal – and the Little Rock warehouse was raided after the precious shipment from Australia and New Zealand arrived.

In another twist, the court-appointed receiver, Michael McAfee, has revealed in his first quarterly report that Fairfax photos have been sold on eBay and may never be recovered.

The originals were already being sold on eBay before the digitising had been completed, according to a report by the ABC’s north America correspondent Lisa Millar.

“In late March [2015] the receiver discovered that over 1,000 items related to Fairfax Media were being listed for sale by Angelica Rogers [John Rogers’ ex-wife],” the report said.

Angelica Rogers told authorities she had 25,000 photos but they discovered four times as many when they raided her property.

“Some of the items listed related to the New Zealand archive. This selling of New Zealand items is a direct violation of New Zealand Protected Objects Act and might warrant further action by the New Zealand government,” McAfee’s report said.

Complicating the legal issues, the New Zealand government had signed an exemption to allow the export of the photos under the Protected Objects Act.

When Fairfax agreed to do business with Rogers two years ago he had already purchased the archives of the Chicago Sun-Times, the Denver Post, the Boston Herald and the Detroit News.

Guardian Australia understands the Herald’s editor-in-chief, Darren Goodsir, has tried to reassure photographers and former employees that the material was safe.

Goodsir said in an internal memo that he was “assured things are in far better shape than what has been suggested”.

In the memo, Goodsir said an estimated 10m negatives from the Herald, the Sun-Herald and the Australian Financial Review were safely stored in Alexandria in inner Sydney and were never sent to the US.

But sources said this had not been confirmed and there were suspicions the negatives may not all be safe.

It remains unclear why the Age would send its negatives to the US while the Sydney-based papers did not.

Goodsir confirmed the print collection was sent to the US for digitisation, scanning and tagging and that a third had been returned in digital form.

“We are currently negotiating for the completion of the scanning and tagging work of this collection with the court-appointed receiver of the US digitisation company [Rogers Photo Archive],” Goodsir said. “The receiver wants to complete this work and we are negotiating a settlement and new agreement to do this.

“The Age negatives were shipped to the US for digitisation, and the actual negatives arrived back in Australia in March and are currently on site at Media House, Melbourne.

“They are safe and well but a little out of order. The US company did actually scan about 90% of the Age negatives and we are also negotiating the return of these scans as part of our settlement with them.”

Fairfax Media has been approached for comment.