Trustbuddy Saga Rolls On

By Ryan Weeks on 12th November 2015

P2P/Marketplace Lending

Complications are cropping up in the Trustbuddy bankruptcy process. 

Trustbuddy Saga Rolls On

The Swedish peer-to-peer lender Trustbuddy suspended services in early October, when the platform’s newly installed management team discovered evidence of “serious misconduct” by the former management team. A week later, the situation was deemed unsalvageable, and Trustbuddy filed for bankruptcy. But the bankruptcy process itself is proving complicated. A mysterious “Benedikt”, who has lent a significant sum of money out via the Trustbuddy platform, across multiple European geographies, today offered an insight into that complexity in the form of a comment on a recent AltFi News article.

At the heart of the liquidator’s challenge is the need to extract some value from the loans that had been managed by the Trustbuddy platform. A letter addressed to the platform’s lenders explained that, due to mismanagement on the part of Trustbuddy, there are “some uncertainties” as to whether certain loans are traceable. There is also doubt about “what the legal consequences of the language used in the terms and conditions of the loans are in relation to the lenders’ rights in bankruptcy”. There are also questions about the segregation of lender funds and about the repayment of outstanding debts by Trustbuddy borrowers. The liquidators believe that 5/6 of the outstanding loans are considered to be “bad debts”. It is the job of the bankruptcy trustee to ensure that what remains at Trustbuddy does not deteriorate in value during the administration process. A number of solutions have been proposed.

These include the suggestion that the administrator will not be entering into “any existing agreement with lenders”. The bankruptcy estate will pursue outstanding debts on behalf of Trustbuddy’s lenders by signing short-term contracts with existing debt collections agencies. And finally, owing to the belief that the platform’s loan portfolio will deteriorate in value unless a new party takes over its administration, the current liquidator may look to “sell the loan portfolios to the highest bidder”. This final course of action is said to have been considered “with the lenders’ best interest in mind”.

Our semi-anonymous commenter, Benedikt, is at best displeased.

To the idea of signing contracts with debt collectors, he has no objection. To the other points, Benedikt clarifies that these loan contracts are segregated property. Whilst it may have been bad publicity for Trustbuddy to pursue the kind of escalating loans that many of its private investors continue to hold, Benedikt has no such qualms. He flatly disagrees with the idea that the loan portfolios should simply be sold off, demanding that prior to any such sale, it must be agreed that:

  • “The loans remain the segregated property of (me) the lender.”
  • “That only the right to collect the loan and interest and principle at a reasonable commission rate is contained in the agreement with the debt collector.”
  • “That the principle and compound interest on any unpaid proportion of the loan continues to be the property of, and to accumulate to, the benefit of the original lender (me) and cannot be released by any other party except on payment in full of the outstanding amounts due.”

The core debate here pertains to the ownership of Trustbuddy’s sizeable number of outstanding loans. Benedikt is resolute in his belief that he alone is the owner of the loans into which he originally bought, stating that:

“Criminal actions comprising theft by former and potentially current Trustbuddy management does not change this fact.”

“Nor do these criminal actions by past and present Trustbuddy management entitle the liquidators to unilaterally change the ownership of these loan agreements and the principles and interest sums due from the borrowers.”

He concluded with the following (and given the eloquence with which he lays forth his objections, we’re content simply to let him speak):

“Under no circumstances shall the title to the principle pass to the debt collection agency for some paltry sum.”

“Worst still that that this money should be stolen and used to repay the personal debts of Trustbuddy management.”

If Benedikt is out there, please do drop us a line ( We’d love to discuss further. 


Benedikt D Hobart

18 Nov 2015 08:58pm

Excellent article and summary Ryan. I have also previously posted more detail here as comments: The evidence of what was actually going on was scattered across countries and languages but for anyone willing to do the research a very nasty picture emerges. The only thing you failed to mention in detail is the sheer compound interest value of the Trustbuddy loan contracts. These are, according to current terms and conditions of P2P platforms, assumed to be owned by the individual trustbuddy lenders. These loans are agreed with an interest rate 12% per month. So any non repayed loan value accumulates at a compounded rate of nearly 400% per year. It was and is a legal contract between the lender and the borrower that was only facilitated by but was not owned by Trustbuddy. It was not all bad. Trustbuddy gave a 2 week no interest grace period and then imposed the 12% charge. The business was short term loan and a bet on ability to pay within 14 days. The intention was not to tie people into long term loans. But with the Trustbuddy bankrupcy many lenders posting on social media assume they will never have to pay. This is not the case because what they have is a legally enforceable debt that only personal bankrupcy can erase. Of course there is nothing in it for the liquidators but any agency permitted by the liquidators to buy these loan agreements will have an asset that will double in value every 6 months and will be a claim against the borrower's estate even after their death. If the principle of loan segregation is overturned and any other legal prescedent is set as a result of the trustbuddy debacle then the entire P2P lending industry can give up now. Benedikt

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