ilmoro
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Post by ilmoro on Jun 24, 2024 10:33:29 GMT
NB The representative respondent, and quite likely claimant as a lender, will be paying a share. Yes, but only a small fraction. Obviously, not everyone is exposed to the QT Loans equally - some have very large exposures, some NIL. So, the gains/cost is not uniform and those with Zero exposure will just have costs without any gains.
No one is going to have zero exposure if they were still involved when the claim was made. I suspect the point you are trying to make is the risk/reward calculation. There are three different exposures to the case. The indemnity retention The QT claim The legal costs of the defence The original risk under the QT claim is xy (x being the funds in the client account & the affected loans, y being the % claimed under the QT), the risk with the defence is xy+xz (z being the % claimed for defence costs) Now some people may not want to risk xz in order to protect xy. The problem is that there are too many uncertainties at the moment to actually define the terms. The other problem is there isnt a clear no risk/no gain situation ... I dont think it is possible that if the claimant loses, only those paying the fees would get their cash because we are dealing with client & trust funds.
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mah
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Post by mah on Jun 29, 2024 13:28:08 GMT
I posted the following in Facebook Group (FSAG), but the Admins took it down. I thought of keeping that post limited to FSAG as that is the detailed/dedicated Forum for Funding Secure – so didn’t post it here. But since they prevented that post from being shown to the other Lenders and we are already discussing this here, let me post the Relevant points from my Analysis here too. But let me clarify again that this is/was my Own Analysis (as is evident below) of the various possibilities and is NO LEGAL OPINION. People are free to have their own Analysis, Agree or Disagree to mine, Add a few other possibilities which I might have missed or Point Out if any of my possibilities aren’t feasible – but I don’t see why it should be taken down. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- The 1st possibility (A) is that a QT Claim simply doesn’t exist (the Judge will finally decide, no matter what we argue). In that case, the Claimant simply loses and No Lenders Lose any Money EXCEPT for the UNCAPPED LEGAL FEES of the Defence which will have to be paid by the Lenders. There is NO GUARANTEE that the Judge will ask the Claimant to pay his Legal Fees and even in that case, it might not be actually Recoverable (for e.g., Claimant declaring Bankruptcy). So, every one Loses by this Challenge – ‘No Challenge’ is a better Option in this scenario (A).2nd possibility (B) is a QT WAS CREATED and the Claimant has a Valid Claim. In that case, they have a claim over All / Some (prorated like other Lenders) of the £500K. But the Claim is against FS, who have No Money. Again, the Judge might pro-rate it (we simply don’t know - even the Claimant seems to have acknowledged it in some form) or might say the entire Money should have been ring-fenced and hence paid back from the Recoveries of ONLY the Loans made after 12/04/2019 – QT (a couple or so cross contaminated Loans with tranches both before and after QT might also be in scope, but only if they have the same priority with pre QT tranches). Or the Judge might even say that the Claimant has a valid Claim against FS, not the Trust Assets/Loans. It’s almost improbable that the Judge would Rule that any historical Pre-QT Loans / Recoveries should be in Scope – how far back do they go – 2015 ? People who lent and got their money back in 2015 could be dead by now and there is no way these amounts could be reclaimed from anyone – so the demarcation has to be 12/04/19. So, the PoC Statement mentioning ‘ Remaining Traceable proceeds’ would also ONLY apply to post QT Loans upto a Limit of £500K. There is NO way that the proceeds could be traced back to pre 12/04/2019, even before the QT was created / the Claimant Lent the Money. We have to Remember here that pre-QT Monies don’t belong to FS / CG&Co / Claimant, but to Lenders.So, scaring all the Lenders that all their historical Loans and Payments are in scope (whether or NOT Recovered yet) is simply NOT True and UNWARRANTED. In this case too, all Lenders will have to Pay the Uncapped Fees of Defence's Lawyer, which is actually all of us, as we have Indemnified (unless we Object to it and that’s why I think all Lenders with No/Insignificant Exposure should object - I’ll Object to both the Court and the Defence Solicitors). So, in this scenario (B), without the challenge, ONLY those Lenders who have exposures to Loans / have Loaned after 12/04/2019 (whether or Not Yet Recovered / in Frozen Fund) would Lose (not all, but upto £500K of Total Loans). Again, this might be pro-rated (we simply don’t know at this stage). However, with the Challenge, on Top of the above, all Lenders, whether or NOT they have Loans post 12/04/2019 or Only a small exposure to QT affected Loans, RISK losing significant amount of Money simply to pay the Fees of the Defence Lawyers (Uncapped). In other words, if the Claimant wins, Lenders will lose Some/All of their QT-only Money (not necessarily all post 12/04/2019 Monies, as the post QT Loandbook is probably much more than £500K), but will also lose their Non QT Money to pay for the Legal Fees of the Defence's Lawyers (CG & Co have already started paying this from General Non-QT Funds - £55K or 11% so far (@£22K/month) even before the hearings / Court Appearances began). So, even in the 2nd scenario, ONLY those who have significant exposures to QT Loans and insignificant exposure to non-QT Loans might gain in the end – everyone else Loses.Shouldn't they FUND this Legal Case on their own (via a Vote / Fundraiser from those who wants to Challenge) rather than forcing everyone to pay ? The clear distinction here is the Claim is for the QT Loans (if he wins) while Defence's Fees are from the Non-QT Funds (if he loses). ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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mah
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Post by mah on Jun 29, 2024 13:56:57 GMT
ilmoro – correct me if I’m wrong, but wrt your post, ‘z’ could be uncapped and is already currently being paid from non-QT Pot. What if ‘x’ proves to be insufficient, which is highly likely.
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agent69
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Post by agent69 on Jun 29, 2024 16:03:07 GMT
ilmoro – correct me if I’m wrong, but wrt your post, ‘z’ could be uncapped and is already currently being paid from non-QT Pot. What if ‘x’ proves to be insufficient, which is highly likely. Is there a non QT pot?
If so, what type of assets are held in it?
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ilmoro
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Post by ilmoro on Jun 29, 2024 19:11:05 GMT
ilmoro – correct me if I’m wrong, but wrt your post, ‘z’ could be uncapped and is already currently being paid from non-QT Pot. What if ‘x’ proves to be insufficient, which is highly likely. Yes, z is currently uncapped, as is x. There is currently no non-QT pot ... it is perfectly possible that the judge could rule that the likely possibility is that the claimants funds are in the loans and they are entitled to reclaim then from the proceeds of such in priority to lenders.
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ilmoro
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Post by ilmoro on Jun 30, 2024 10:46:05 GMT
I posted the following in Facebook Group (FSAG), but the Admins took it down. I thought of keeping that post limited to FSAG as that is the detailed/dedicated Forum for Funding Secure – so didn’t post it here. But since they prevented that post from being shown to the other Lenders and we are already discussing this here, let me post the Relevant points from my Analysis here too. But let me clarify again that this is/was my Own Analysis (as is evident below) of the various possibilities and is NO LEGAL OPINION. People are free to have their own Analysis, Agree or Disagree to mine, Add a few other possibilities which I might have missed or Point Out if any of my possibilities aren’t feasible – but I don’t see why it should be taken down. ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- The 1st possibility (A) is that a QT Claim simply doesn’t exist (the Judge will finally decide, no matter what we argue). In that case, the Claimant simply loses and No Lenders Lose any Money EXCEPT for the UNCAPPED LEGAL FEES of the Defence which will have to be paid by the Lenders. There is NO GUARANTEE that the Judge will ask the Claimant to pay his Legal Fees and even in that case, it might not be actually Recoverable (for e.g., Claimant declaring Bankruptcy). So, every one Loses by this Challenge – ‘No Challenge’ is a better Option in this scenario (A).2nd possibility (B) is a QT WAS CREATED and the Claimant has a Valid Claim. In that case, they have a claim over All / Some (prorated like other Lenders) of the £500K. But the Claim is against FS, who have No Money. Again, the Judge might pro-rate it (we simply don’t know - even the Claimant seems to have acknowledged it in some form) or might say the entire Money should have been ring-fenced and hence paid back from the Recoveries of ONLY the Loans made after 12/04/2019 – QT (a couple or so cross contaminated Loans with tranches both before and after QT might also be in scope, but only if they have the same priority with pre QT tranches). Or the Judge might even say that the Claimant has a valid Claim against FS, not the Trust Assets/Loans. It’s almost improbable that the Judge would Rule that any historical Pre-QT Loans / Recoveries should be in Scope – how far back do they go – 2015 ? People who lent and got their money back in 2015 could be dead by now and there is no way these amounts could be reclaimed from anyone – so the demarcation has to be 12/04/19. So, the PoC Statement mentioning ‘ Remaining Traceable proceeds’ would also ONLY apply to post QT Loans upto a Limit of £500K. There is NO way that the proceeds could be traced back to pre 12/04/2019, even before the QT was created / the Claimant Lent the Money. We have to Remember here that pre-QT Monies don’t belong to FS / CG&Co / Claimant, but to Lenders.So, scaring all the Lenders that all their historical Loans and Payments are in scope (whether or NOT Recovered yet) is simply NOT True and UNWARRANTED. In this case too, all Lenders will have to Pay the Uncapped Fees of Defence's Lawyer, which is actually all of us, as we have Indemnified (unless we Object to it and that’s why I think all Lenders with No/Insignificant Exposure should object - I’ll Object to both the Court and the Defence Solicitors). So, in this scenario (B), without the challenge, ONLY those Lenders who have exposures to Loans / have Loaned after 12/04/2019 (whether or Not Yet Recovered / in Frozen Fund) would Lose (not all, but upto £500K of Total Loans). Again, this might be pro-rated (we simply don’t know at this stage). However, with the Challenge, on Top of the above, all Lenders, whether or NOT they have Loans post 12/04/2019 or Only a small exposure to QT affected Loans, RISK losing significant amount of Money simply to pay the Fees of the Defence Lawyers (Uncapped). In other words, if the Claimant wins, Lenders will lose Some/All of their QT-only Money (not necessarily all post 12/04/2019 Monies, as the post QT Loandbook is probably much more than £500K), but will also lose their Non QT Money to pay for the Legal Fees of the Defence's Lawyers (CG & Co have already started paying this from General Non-QT Funds - £55K or 11% so far (@£22K/month) even before the hearings / Court Appearances began). So, even in the 2nd scenario, ONLY those who have significant exposures to QT Loans and insignificant exposure to non-QT Loans might gain in the end – everyone else Loses.Shouldn't they FUND this Legal Case on their own (via a Vote / Fundraiser from those who wants to Challenge) rather than forcing everyone to pay ? The clear distinction here is the Claim is for the QT Loans (if he wins) while Defence's Fees are from the Non-QT Funds (if he loses). ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Scenario A - value of the importance of the challenge in the judge reaching that conclusion. This is inevitably less likely if there is no-one arguing for that interpretation or presenting evidence, perhaps not otherwise available (important in both Lendy directions & FS directions cases) Lenders will still pay admin fees/costs under a BA (unopposed) even in this scenario. Scenario B - the breadth of the claim is unclear. The claim is not against FS and that wont even form part of the case unless the challenger makes that argument & the judge allows the scope of the claim to be expanded. The case is dealing with a client account subject to primary & secondary pooling events. Should the judge determine that the money should have been in the client account then there is scope for the resulting shortfall to fall at any point from the pooling event (ie administration) and be resolved by a pro-rata distribution of the shortfall from that point. This brings all funds in or entering into the CA from the point of administration into scope & hence loans that pre-date 12/4/19 in entirety. This is why the admin have retained a percentage as an indemnity retention. Ownership is a problematic term, lenders hold rights to the proceeds of loans/client money but the basis of this case is that the claimant may also hold rights to these funds. The argument is whose right takes priority in the event of a shortfall and how a shortfall should be resolved. Note that part of the claim is that funds may have been used to make up shortfalls in loan proceeds to lenders so pre-QT loans may have received QT cash. The fundamental flaw in your argument is that there are QT funds and non-QT funds, there arent as the scope of the claim is dependent on the Court's determination. There is the frozen client account and the loan account ... the QT could affect the first, both or neither, the challenger costs the latter. Other than the indemnity retention (the location of which is unclear) I dont believe the administrators have retained any funds from loans that are not 'contaminated' by the QT claim. As Ive said already, it is a risk/reward question but it needs to be correctly framed.
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michaelc
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Post by michaelc on Jun 30, 2024 13:45:50 GMT
I also don't understand why the admins would take that down. I hope they will explain.
Good to see, so far at least, this board allowing it to stand.
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mah
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Post by mah on Jun 30, 2024 14:01:45 GMT
ilmoro – correct me if I’m wrong, but wrt your post, ‘z’ could be uncapped and is already currently being paid from non-QT Pot. What if ‘x’ proves to be insufficient, which is highly likely. Is there a non QT pot?
If so, what type of assets are held in it? There was/is a Frozen Pot (directly affected by QT) and a separate Pot where the proceeds of Loans not directly affected by QT were held (non-QT Pot). The proceeds from the 2nd Pot were distributed to the Lenders minus an Indemnity % being witheld (should the claim extend to these). The current Fees of the Defence Lawyers are being paid from this retained Fund. I guess the new Recoveries (if any) won't be distributed until this case is resolved - hence either kept in the 2nd Pot or a new Pot (doesn't really matter).
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ilmoro
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Post by ilmoro on Jun 30, 2024 23:18:51 GMT
Is there a non QT pot?
If so, what type of assets are held in it? There was/is a Frozen Pot (directly affected by QT) and a separate Pot where the proceeds of Loans not directly affected by QT were held (non-QT Pot). The proceeds from the 2nd Pot were distributed to the Lenders minus an Indemnity % being witheld (should the claim extend to these). The current Fees of the Defence Lawyers are being paid from this retained Fund. I guess the new Recoveries (if any) won't be distributed until this case is resolved - hence either kept in the 2nd Pot or a new Pot (doesn't really matter).
I dont believe this is correct. There are the frozen funds which are the funds held in the client account e wallet at the point the claim was made and there is the post administration client account where all the proceeds of loans after the claim are held, this includes funds from any redemptions for loans that may be subject to the QT as originating after 12/4/19 or earlier pari passu tranches of such loans. Both accounts therefore contain funds that maybe subject to the QT. The proceeds distributed from the second account are those loans that are entirely outside the scope of the QT claim, minus an indemnity redemption. The legal fees are being paid from sums being held for the investors but it has not been clearly defined. (The first payment post dates the last admin report so is not accounted for)
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agent69
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Post by agent69 on Jul 18, 2024 11:58:38 GMT
Fortunately I'm not in this loan for big money. However, can I see if I've got this right:
J C Starr entered into a written agreement with FS to pay £500k onto the platform. The money was to be retained in a seperate account, and was to be used to underwrite new loans on the platform (before these loans were offered to retail lenders). FS had sole discretion on which loans would be funded. However, the money was never used for the specified purpose, instead the money was:
- used to cover general platform running costs, and / or
- transfered into the client account to make good shortfalls in payments to investors, and / or
- used to fund off platform loans
I am struggling to understand why you can't have a simple (and cheap) legal case to look at the written agreement to get a decision on whether a QT exists or not. Incurring significant legal expense in arguing whether JCS can take money from the client account seems a bit like putting the cart before the horse. From my perspective if a QT exists then it would be fair that any part of the £500k:
- used to pay platform running costs should be recovered from the assetts of FS (assuming they have some)
- paid into the client account should be repaid by investors that incorrectly received that money
- used to fund off platform loans, should be returned to JCS based on whatever was recovered from these borrowers.
I can't see that it could be legally allowed for JCS to plunder the contents of the client account, irrespective of where that mony came from.
A settlement with JCS has been reached. More info in your in box, but doesn't sound like a lot of money left for investors.
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michaelc
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Post by michaelc on Jul 18, 2024 12:40:39 GMT
Could someone perhaps remind us who JC ***R holdings are, who Paul M is and why I have to give either of them any money ?
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dh1
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Post by dh1 on Jul 18, 2024 12:45:08 GMT
It's particularly important to note that lenders have the right to object to this settlement, etc. Key wording in the email:
"... The Court’s Order sanctioning the settlement, which is attached (together with the court application for settlement), provides that any investor may apply to Court and challenge the Order (including the settlement sum and the amount of costs approved to date for Mr M...) by issuing an application at Court by no later than 4pm on 8 August 2024. Please let us know if you require a copy of the underlying documents, in order to consider your position on the settlement. Please note that distributions may be delayed if investors object to the settlement. ..."
also:
"... If no investors apply to challenge the Order within the above time scale, the settlement agreement authorising the payment of the settlement sum of £200,000 to JCS will be entered into by the parties on 9 August 2024 and we will transfer the settlement sum to JCS along with Mr Mundy’s agreed legal costs by 4pm on 16 August 2024. The Court will then decide ancillary issues at a hearing on 14 October 2024 (including how the settlement sum and the costs of the settlement are to be spread across the frozen funds), following which we anticipate a substantial distribution will be made from the frozen funds. ..."
Just like the Administrators (they have spent "... £48,866.50 plus vat (subject to further court order where the costs will be looked at in detail or by agreement of the parties) ...") I take no position on all this. And I've not spent any money at all coming to this conclusion....!
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moist
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Post by moist on Jul 18, 2024 12:49:12 GMT
So to summarise, if this goes through, we get some money....if someone objects we get none, and would likely lose more.
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ilmoro
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Post by ilmoro on Jul 18, 2024 12:54:55 GMT
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aj
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Post by aj on Jul 18, 2024 13:26:13 GMT
Looks like the vultures win again.
JC Starr will have spent the majority of his settlement on legal fees, a massive waste for all. Paul Ms legal fees also take a chunk out of investors money. The administrators legal fees for taking a neutral position are taking another bite. They're now going for a double dip to take a bit more cash out to cover their admin costs.
Finally, instead of concluding things swiftly they've left it open until much later in the year, presumably hoping someone provides them with another excuse to rack up more fees at everyone's expense.
We'll never know if Pauls actions achieved a better result than leaving it to the administrators would have; the only thing clear to me is that any more legal wrangling isn't going to enrich anyone except the lawyers.
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