The liquidation of failed Swedish lending platform TrustBuddy is proving uniquely complex.
TrustBuddy filed for bankruptcy on October 19th, after having suspended services on October 12th, in wake of evidence of “serious misconduct” by the former management team. By early November, it had become clear that the liquidation process – which is being orchestrated by Lindahl – is plagued by complexity. The core issue pertains to the ownership of TrustBuddy’s outstanding loan book, which as of October 8th amounted to approximately SEK 302 million. In short, it is a question of whether the outstanding loans are the segregated property of the platform’s individual lenders, or the property of the bankruptcy estate.
As a means of returning value to the platform’s lenders, Lindahl had mooted the idea of selling off the loan portfolio “to the highest bidder”. This course of action was met with a fair degree of opposition. As one particularly disgruntled individual wrote in an update at the time: “The loans remain the segregated property of (me) the lender.”
That now appears to have been formally recognised by Lindahl. In a letter addressed to TrustBuddy’s lenders which was published towards the end of last week, the liquidator laid out its approach.
First, however, note that this is an immensely convoluted bankruptcy process – owing largely to the fraudulent manner in which it transpires the TrustBuddy platform operated. See, for example, the following quote from Lindahl, which provides some indication of the manner in which lender money was managed:
“… some partial payments from borrowers may not have been reported back to the lenders of current loans (and have instead been lent out again by TrustBuddy).”
But the more interesting story here revolves around what happens next. Lindahl has confirmed that several lenders had been in touch to express the view that their interests would be better served if the outstanding loans were pursued – with the help of debt collection agencies – rather than simply sold off. Following that response, alongside a recognition of the lenders' segregation right, Lindahl has settled upon the following solution:
“We will contact a number of lenders and present the bids we have received and simultaneously make an offer to the lenders where we would set up an organization to collect debts on their behalf. The bankruptcy estate will naturally demand payment for their work and the cost of the debt collection in this option becomes relevant.”
At present, there appears to be no clear time frame for the return of lender funds. The priority in the short term is to determine exactly how client funds ought to be divided and how the outstanding loans should be managed. When these two matters have been cleared up, the liquidator expects to begin making “partial distributions”, but Lindahl has warned that it will be “some time” before this comes to fruition.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.