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How has the collapse of TrustBuddy, a peer-to-peer (P2P) platform lender, raised concerns about regulation in the P2P sector? Charles Leveque, partner at Harbottle & Lewis, explains that the collapse of TrustBuddy may encourage those in the sector to question the efficacy of the current regulation in the P2P sector.
Lenders’ money frozen following P2P lender collapse, LNB News 16/10/2015 10
Daily Telegraph, 16 October 2015: Peer-to-peer (P2P) platform lenders have had their money frozen this week following the collapse of TrustBuddy, the world’s first P2P lending platform. P2P lenders give money directly to borrowers in return for capital plus interest.
What is the status of the funds trapped in the platform?
TrustBuddy’s assets appear to be in the hands of Swedish administrators.
If the administration of TrustBuddy were governed by English law, the administrators would have an obligation to ensure that TrustBuddy’s creditors are satisfied by realising and distributing TrustBuddy’s assets.
What does this mean for investors?
Presumably, TrustBuddy’s assets are principally its debtors and, depending on the terms on which TrustBuddy has made loans, the administrators will probably need to wait for the loans to reach maturity before collection. Having collected the loans, the administrators would, under English law at least, have an obligation to use those funds, to the extent possible, to satisfy creditors in the order prescribed by law. Whether TrustBuddy’s lenders are treated in the same way as other unsecured creditors will depend on Swedish law and the way that lenders’ investments were structured.
It has been alleged that TrustBuddy used its lenders’ funds to satisfy its own debts rather than for the intended purpose of lendin
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