Were you were among the many investors looking for a no-hassle income investment, packaged in a tax-efficient Innovative Finance ISA (IFISA)? If the answer is yes, you probably invested with the Crowdstacker peer-to-peer lending (P2P) platform.
The platform offers loans to businesses that have the likelihood of potential growth. But not everything goes to plan as we’ll deduce from this article.
Crowdstacker was amongst the earliest P2P platforms to gain full permission from the FCA. On 6th April 2016, it became the first P2P platform to launch an Innovative Finance ISA. Later in 2017, Crowdstacker broke the record for funding when it completed UK’s largest crowdfunded P2P loan to date. It received funding of over £15m from Crowdstacker’s users with Seedrs fundraising £815,694 on 19th December 2018.
Crowdstacker’s investment process provided a list of businesses that wanted to borrow money from investors. An investor would then manually select the business they want to lend to from Crowdstacker. Investors were to earn interest every quarter and receive their capital at the end of the loan term.
Two businesses were kin to borrower money from Crowdstacker, ‘Amicus PLC’ and the ‘Quanta Group’.
Amicus Bad Loans
Amicus is a short term property lending business. Lenders loaned their money to Amicus through Crowdstacker. Thereafter, Amicus loaned on a short- term basis to property developers, landlords and property professionals. These loans were known as bridging loans.
As fate would have it, Amicus went into administration in December 2018. The shocking twist in events that followed raised questions about the transparency of the P2P industry. Lately, the amounts lent through P2P platforms have increased leading to an increase in scrutiny.
Amid concerns that it may struggle to recover funds from Amicus, Crowdstacker investors are increasingly critical of the P2P lending platform,
Amicus’s subsidiaries were sold without prior agreement from Crowdstacker, with the proceeds going to another creditor. This development raised questions on whether the platform will be able to recover investors’ money.
BurningNight Bad Loan
A similar case happened in 2017 when bar chain operator BurningNight raised more than £7.5m from investors via Crowdstacker’s platform. The target returns were 7% per annum over a three-year period. Investors were informed that the loan was secured over the assets and business of BurningNight with a first-ranking debenture. Freehold and leasehold UK properties were the purported assets.
Later that year, it emerged that BurningNight’s bars were underperforming and one of the company’s subsidiaries, B&W Logistics bought them in December 2017. However, B&W Logistics went bust in June 2018 and BurningNight itself went into administration in September the same year.
In December 2018, Crowdstacker emailed investors informing them of the verdict of the appointed BurningNight administrator. The administrator discovered that certain assets of BurningNight’s subsidiaries were sold to another company and the proceeds dished out to a third-party.
Why BurningNight assets were sold under the noses of Crowdstacker officials when the platform purportedly had first charge over the loan is still a mystery to many. Crowdstacker claims they’re waiting for the final verdict and are urging patience to allow the legal process to play out. But there’s little chance of investors recouping their capital investment in full as Crowdstacker seems “clueless” in their recovery approach.