An investigation initiated by the new management of TrustBuddy AB has indicated serious misconduct within the company. The Board of Directors has informed Nasdaq OMX and the Swedish FSA about the situation, and the FSA has demanded that TrustBuddy is to stop offering its services with immediate effect. As a consequence, the company’s planned rights issue is suspended. The Board of Directors will prepare a control balance sheet and are currently evaluating all available options in order to find a viable solution for all parties.

Background

The new management team has been in place since early September, 2015. In connection with the repositioning of the business, an investigation of the business activities undertaken by the former management was initiated. The investigation is ongoing, but has so far pointed at several breaches of internal or external regulation:

  • The Company has used lenders’ capital in violation of their instructions, or, without their permission. As a result, there is currently a 44M SEK (approx 4.7M EUR) discrepancy between the amount owed to lenders and the available balance of the client bank accounts.
  • The total amount currently lent out on the platform is approximately 300 MSEK, of which, 37 MSEK is not assigned to lenders.
  • The Company has re-assigned existing loans, a significant portion of which were likely non-performing, to new capital deployed by lenders.

The investigation indicates that these practices were likely in place since the TrustBuddy platform began operation.
Actions taken by the new management and the Board of Directors

The questionable practices mentioned above, limited to the Company’s short-term lending business, have been stopped with immediate effect.

Further, the Board of Directors informed Nasdaq OMX and the Swedish FSA about the findings. Based on the findings, the FSA demanded that TrustBuddy is to stop offering its services with immediate effect. As a consequence, the planned rights issue, scheduled to run from 14 October 2015 to 30 October 2015, is suspended.

Due to the severe breaches of the internal and/or external regulation, the Board of Directors has also decided to file a report to the Swedish Police Authority.

The Dutch subsidiary Geldvoorelkaar, which focuses on lending to small and medium-sized enterprises, has been operating on a stand-alone basis and has not been subject to misconduct.

Members of the previous management team that are current employees of the Company have been put on suspension while additional investigation takes place. Current and former employees that have participated as lenders on the TrustBuddy platform have had their accounts put on hold.

The Board of Directors will as soon as possible prepare a control balance sheet, and will also investigate the potential impact of the events on other significant agreements.

Information for lenders and investors

All services and products of the parent company TrustBuddy AB are being suspended. Therefore, it is not possible to make any withdrawals or deposits.

The trading in the company’s shares has been halted since 7 October, and will continue to be halted until the company has presented new information.

(Source: company statement)

Trustbuddy’s stock has been in decline for quite a while. The payday loan like business model never convinced me. An ealier reported acquisition of Italian Prestiamoci was not finalized. See earlier articles on Trustbuddy.

EDIT: According to press articles the Swedish FSA is expected to conduct a review of the 5 other p2p lending companies in Sweden Lendify, Sparlån, Savelend, P2P Sweden and Lendlink to make sure they operate in accordance to the law.

NOTE: The Haven Investor team for the time being has removed Trustbuddy from our portfolio of partners.