TrustBuddy Files for Bankruptcy as Situation is Deemed “Increasingly Complex”

Unhappy TrustBuddyTrustBuddy jolted the peer to peer lending world as “suspected misconduct” compelled the platform to shut down operations last week.  Now the firm has publicly stated it can no longer operate in any form, forcing the company to file for bankruptcy as the situation is “increasingly complex.

An audio webcast is scheduled for later today to explain the situation to shareholders. Bot the Chairman of the Board Simon Nathanson along with CEO Philip Mikal and Lars-Henrik Andersson, appointed by the bankruptcy court, will present background information and discuss the process of moving forward.

TrustBuddy had been struggling to reorganize its operations to move away from a “payday loan” type lender to one more focused on consumer lending. The board had brought in new management that apparently uncovered a 44 Million SEK ($5.4M) discrepancy. he misconduct was said to be “likely in place since the TrustBuddy platform began operation”. TrustBuddy was a publicly traded entity.

Following the revelations Swedish authorities forced TrustBuddy to cease operations.  Swedish police were contacted to conduct a criminal investigation.

The statement released by the board of directors, is republished below:

Further investigation has revealed that the situation is increasingly complex and it will not be possible to continue operations in any form. The Board of Directors concludes that the company is insolvent. To ensure fair treatment of all stakeholders, the Board of Directors, with great disappointment, has decided to file for bankruptcy. The District Court in Stockholm has appointed Lars-Henrik Andersson of Lindahl law firm to handle the process going forward.

The services of the company will continue to be closed, and the trading in the share will not be resumed.

Simon Nathanson, Chairman of the Board of TrustBuddy AB, comments:

“As a result of the misconduct, our ongoing discussions with stakeholders, lack of liquidity and inability to operate a regulated operation, TrustBuddy cannot move forward with the business. Today’s decisive action will give all stakeholders the opportunity to receive fair treatment in a structured process. The Board of Directors and management will continue to support the process going forward in any way we can.”

Lars-Henrik Andersson, Lindahl law firm, comments:

“My immediate focus will be to fully understand the critical questions of the business in order to find the best way to safeguard the interests of the creditors and other stakeholders. One action is to immediately take control over all assets of the company. I am looking forward to an efficient cooperation with the current board and management of TrustBuddy.”


To participate in the audio webcast, today, October 19th, at 13.00 CET,  and have the opportunity to ask questions, please dial the following number: +44 (0) 1452 567058, pass code 1929786.

The webcast will also be available on

Sponsored Links by DQ Promote

  • Pingback: NextGen Islamic Finance – wahed()

  • Pingback: Risk in P2P lending – Chinese example | Crowdfunding Cave()

  • Pingback: Bondora: Regulatory Environment is a “Fraught Issue” in Europe. Except for the UK | GoGoFactor()

  • Pingback: Bondora: Regulatory Environment is a “Fraught Issue” in Europe. Except for the UKIndiegogo Projects | Indiegogo Projects()

  • Pingback: Crowdfunding just hit puberty |

  • Pingback: What the Last 14 Days Mean for the Crowdfunding Industry()

  • Pingback: Payday Loan Bankruptcy Laws | The Great Payday Loan Solution()

  • elamir

    Benedikt, do you now anything about any lender from TB? I think about organize all cheated lenders and together fights for our rights against TB management.

    • Benedikt

      TB Management is history. The individuals will never rise again. They will not survive on Linkedin or facebook with their former identities.
      The big risk now for TB lenders is the decision of the liquidators as to the status of the lenders’ accounts.
      What the lenders need to know is what was their contract was with the borrowers. I have been unsuccessful in locating this so maybe that is information that has been deliberately hidden.
      Let’s consider the liquidator’s situation. They have a loan book that they have to dispose of.
      As a lender (of a small proportion of my funds) to Trustbuddy borrowers I can still see my funds being gradually returned. About 25% so far but over a full month this will increase. This is only true of Sweden and Norway. Denmark, Poland, Spain, Finland have been frozen since 14th / 19th October. I think this is because the link with the accounts has been cut but the funds will be being returned in the same ratios as Norway and Sweden.
      Interestingly the value of the portfolio is increasing by 10% more than the repayment indicating that interest is also being repayed.

      But the message on the facebook chat is that “now Trustbuddy is bankrupt we don’t need to repay our loans.”
      A peer to peer lender going bankrupt is relatively new.
      So consequences have not really been thought through.
      You see Trustbuddy lent money at 12% per month or 144%
      per year. But 144% per year compounded monthly is equal to 390%
      after one year.
      There are very limited options available to the liquidators. Firstly they have to decide if lenders’ funds are truly segregated from the Trustbuddy finances. If not they will use returning lenders’ funds and the loan interest to pay off the lenders and the business creditors. But if lenders funds are considered segregated then any amounts stolen by Trustbuddy employees are proceeds of theft and must be returned to the lenders from any Trustbuddy employees or business accounts before the company’s debts can be repaid from the remaining funds.
      The most probable outcome is that the liquidators will on legal opinion decide that lenders’ funds are segregated. If not there will be a single point for a class action against the former owners of Trustbuddy and against the liquidators themselves.
      Trustbuddy will most probably have written the loan agreement between each lender and their borrowers at the full interest rate of 12% per month and then reduced the lender’s return by making charges rather than taking a share of the interest.
      What we really need is a copy of the borrowers loan contract and the proof that on liquidation of Trustbuddy all rights pass to the lender/s of the funds.
      When the liquidators wash their hands of the loan book these charges will cease. The liquidators will not be able to sell the individual loans on to a debt collector because the loans themselves are (segregated) were not Trustbuddy property.
      Don’t forget P2P lending sites claim to set up legally binding loan agreements between individual lenders and the borrowers.
      The liquidators will then decide to return whatever money has already been repaid by the borrowers to the lenders and leave the lenders to collect the rest. Then they will just hand over all the loan agreements / contract details / names / addresses etc. to the lenders.
      The response to one of the final questions in the Trustbuddy 19th October webcast says exactly that:

      You see where this is leading.
      Every Trustbuddy lender is going to be handed a lot of legally enforceable loan agreements with an interest rate of 144% per annum monthly compounded. This represents a potential return on investment of nearly 400% per annum. At this point it really is in the interests of the borrowers to repay the Trustbuddy loans in full within the one month term. They should ignore any advice to the contrary.

      The debt collection agencies used by Trustbuddy to collect delayed repayments are regulated.
      People who lent money through Trustbuddy are not, and will undoubtedly be very creative in their debt collection strategies.
      For a start there is no hurry. All the lender has to do is send one letter to each borrower asking for repayment. Then sit back as the value of the borrower’s debt doubles every 6 months. Unless the borrower themself goes bankrupt there is nothing to relieve the borrower of the debt obligation or to prevent the debt accumulating for years to come. For example after 2 years it is 1,600% of its original value. If the borrower should pass away then the loan becomes a claim against the estate of the borrower depriving the decendants of their inheritance.
      The next month will be interesting.

    • Benedikt

      It is not impossible that trustbuddy was a scam with very few real lenders like you and me and most of the money lent out having been borrowed at market rates by management and employees. Unlikely but not impossible. A ploy to hype the share price and make a killing on the stock market. What is surprising to me is the sheer absence of cheated lenders complaining online? My posts here keep getting deleted so I won’t waste time explaining any more in detail.

      The Liquidators are also being very non comittal as to the status of the segregated funds. If most of the lenders’ funds in the lender’s accounts was actually money borrowed by Trustbuddy employees and management then they could argue that segregation for the few genuine lenders does not apply.

      There is a fuller explanation here.

  • Benedikt

    There is an important legal distinction between peer to peer lending and other forms of investment. The lender’s money is supposed to be held in an account that is separate to the trading account of the P2P company. The lender’s money also remains the lender’s money and the P2P company has no claim to it for the purpose of its own business running costs. Any defaults by borrowers and debt collection expenses are however at the lender’s cost. However the liquidators appear to be claiming that this lenders money is to be used to settle the trading debts of Trustbuddy in liquidation. Is this a legal or are the liquidators actually the ones misappropriating the lenders’ funds. The lenders accounts are still shown on the trustbuddy platform and money can be seen accumulating as borrowers repay loans. What legal justification do the liquidators have for preventing lenders from withdrawing money as it is returned? How did the lender’s money become the property of the liquidators trustees? The returning money is the principle and interest on a loan arranged between the lender and the borrower. While trustbuddy may be entitled to commissions as money is returned they are not in my opinion legally entitled to seize the principle and interest intended by the borrower and lender to be returned to the lender. Any legal opinions out there?

    • Nicholas

      This case is very similar to the so called “Panaxia case” a couple of years ago, which unfortunately was solved by settling. It would have been interesting to get an official indication of the legal status of this difficult question.
      The main issue is whether the lenders are allowed to separate their money in the liquidation. TB was obligated to keep the lenders’ funds separated but apparently failed to do so. This is where it gets interesting from a legal point of view and why this process may take many years to resolve. If the lenders’ funds were mixed with other funds, the funds are legally no longer subject to separation and the lenders have to wait for their turn as “normal creditors”. There are legal cases in Sweden that indicate that if a mix of funds is caused by criminal activity, then the funds might still be separated even if they were mixed. This is also a similarity with the mentioned Panaxia case, during which a an expert (professor Mikael Möller) of this subject stated that separation of funds would have been the legal outcome. This statement doesn’t necessarily carry any significance in solving legal issues but is still interesting as it states the legal situation.

      In conclusion, the lenders have a quite good chance to receive their funds but this is an uncertain legal area and is highly interesting since it rises questions that haven’t previously been answered.

  • Benedikt

    There appears to be evidence of fraud by employees and former management of Trustbuddy. Has anyone else who lost money with Trustbuddy considered crowdfunding a private prosecution to ensure that those responsible go to prison and that their assets are seized to repay any funds stolen from lenders?