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Post by perpetualtraveler on Nov 30, 2016 9:14:25 GMT
Given the workings of P2P loans, it would be pretty easy to fake loans and run a ponsi scheme, paying people with money from other investors, as long as people do not withdraw as much. What are the chances platforms are in fact a Ponzi scheme? Is there any way to verify they are not?
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Liz
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Post by Liz on Nov 30, 2016 9:22:51 GMT
Given the workings of P2P loans, it would be pretty easy to fake loans and run a ponsi scheme, paying people with money from other investors, as long as people do not withdraw as much. What are the chances platforms are in fact a Ponsi scheme? Is there any way to verify they are not? What's a "Ponsi" scheme? Maybe en.wikipedia.org/wiki/Ponzi_scheme
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registerme
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Post by registerme on Nov 30, 2016 9:51:54 GMT
When it comes to this subject, and for obvious reasons, naming specific platforms has never worked out well. However the subject can be discussed just as effectively in the general sense, so I've redacted the identified platforms in the two posts above.
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registerme
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Post by registerme on Nov 30, 2016 9:53:24 GMT
perpetualtraveler one thing that gives me comfort is where charges against an asset have been lodged at Companies House.
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JamesFrance
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Post by JamesFrance on Nov 30, 2016 10:10:08 GMT
At least 3 of the European sites make their annual accounts available. These are all audited by local branches of well known international accountants, so hopefully anything of that sort would be noticed during the audit.
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Post by jackpease on Nov 30, 2016 10:13:58 GMT
and bear in mind that a platform could be an intended Ponzi (fraud) - probably quite easy to spot - and an unintended Ponzi.
The latter is hard to spot - is likely well loved on this platform - everyone happy because continued expansion and darling status means that any flaws/defaults are easily plugged.
Stable platforms where the defaults are flowing in at the expected rate and investors are hit (rather than platforms swallowing the loss) and become unpopular on this board (P2P involves no risk, right?) - they are the ones that we can trust as post-Ponzi!
Jack P
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Post by perpetualtraveler on Nov 30, 2016 10:35:41 GMT
perpetualtraveler one thing that gives me comfort is where charges against an asset have been lodged at Companies House. Is there a non UK equivalent for instance with the Estonian companies?
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registerme
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Post by registerme on Nov 30, 2016 10:40:19 GMT
I've no idea, sorry. You could look on platform sub-forums and see if there is any relevant discussion.....
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shimself
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Post by shimself on Nov 30, 2016 13:29:25 GMT
perpetualtraveler one thing that gives me comfort is where charges against an asset have been lodged at Companies House. Where the loans are to identified businesses which exist (with or without a registered charge) then the businesses would have to be part of the gang, which is conceivable for one or two, but not for enough to make a ponzi. Where the loans are to individuals however, where we don't know who they are, the possibilities then are different.
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fp
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Post by fp on Nov 30, 2016 20:35:13 GMT
I am getting into a habit of checking CH for charges etc, but certain platforms give you absolutely no information about the borrower which makes this an impossible task, this raises suspicions, and rightly so.
Its pointless saying you have a debenture registered at CH against a "jewellery grouped asset loan" if you can't produce one, or give the lenders the slightest clue to follow up and do your own DD to find it.
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max
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Post by max on Nov 30, 2016 21:42:55 GMT
A related question to the above is:
What should prevent a well established platform from switching into a Ponzi scheme?
I don't believe lenders' duedil is a deterrent. Perhaps the FCA - but that usually comes after the first bomb explosion.
Note that borrowers and securities could still be real. All it's needed are forged valuation reports.
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shimself
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Post by shimself on Dec 1, 2016 8:38:44 GMT
A related question to the above is: What should prevent a well established platform from switching into a Ponzi scheme? I don't believe lenders' duedil is a deterrent. Perhaps the FCA - but that usually comes after the first bomb explosion. Note that borrowers and securities could still be real. All it's needed are forged valuation reports. It would also need co-operating (co-conspiring) borrowers. So a quick hit and run job with a couple of mates when the platform is sinking would be erm, feasible, but a prolonged fraud wouldn't work because an honest borrower would soon blow the whistle
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max
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Post by max on Dec 1, 2016 9:07:18 GMT
A related question to the above is: What should prevent a well established platform from switching into a Ponzi scheme? I don't believe lenders' duedil is a deterrent. Perhaps the FCA - but that usually comes after the first bomb explosion. Note that borrowers and securities could still be real. All it's needed are forged valuation reports. It would also need co-operating (co-conspiring) borrowers. So a quick hit and run job with a couple of mates when the platform is sinking would be erm, feasible, but a prolonged fraud wouldn't work because an honest borrower would soon blow the whistle Why would the platform need to co-operate with the borrower? The borrower gets "x" funds and register a charge over one of her assets. The platform misrepresents the asset to its investors (us!) and collect "2x". The trick can be repeated until: - A borrower decides to register as an investor in that platform AND investigate her own loan AND report it to the FCA (perhaps better to select desperate dodgy borrowers)
- Not enough new borrowers or new investors are found to continue the Ponzi scheme (perhaps better to offer high interests to lenders and flexi repayments to the borrowers)
- A large number of borrowers default (perhaps time to kiss goodbye and catch your flight!)
I wonder if the FCA has even considered the possibility of the above. And if so, what measures they have in place to protect us.
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nick
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Post by nick on Dec 1, 2016 12:50:07 GMT
You would need to perform "(platform) due diligence". This might include: 1. Looking up the domain name to see who registered it and where the address is 2. Phoning them and talking to them to get a feel for their operation. 3. Transferring a small amount of cash to them, waiting, then transfer it back. 4. Finding a thread or board about the platform here and see what others are saying. 5. Check membership of organisations / registration. 6. Looking at the details the platform provide about a loan: a) Look at the security: i) Is there a charge registered to the platform at company house ? ii) Is there a charge registered at the land registry ? iii) Visit the security in person or with google maps - is it as described? b) Look at the borrower: i) Check company accounts at beta companies house ii) Look at directorships iii) google the director / company The other basic DD I perform on platforms, but one of the most important, is looking at the background of individuals involved with the platform - eg directors and shareholders. If they have a previous history of being involved in the financial services industy and/or have previously been approved persons under the FSA/FCA regime, it gives me a bit more comfort that they have some competence and some reputation to protect. Far from fool proof as Madoff showed, but nevertheless a minimum criteria I apply when considering any new platform.
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shimself
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Post by shimself on Dec 1, 2016 22:32:51 GMT
It would also need co-operating (co-conspiring) borrowers. So a quick hit and run job with a couple of mates when the platform is sinking would be erm, feasible, but a prolonged fraud wouldn't work because an honest borrower would soon blow the whistle Why would the platform need to co-operate with the borrower? The borrower gets "x" funds and register a charge over one of her assets. The platform misrepresents the asset to its investors (us!) and collect "2x". The trick can be repeated until: - A borrower decides to register as an investor in that platform AND investigate her own loan AND report it to the FCA
...... I think there would be very few borrowers who don't have a decent idea of how much they are borrowing. It would be reported very soon. Now if the platform were to misrepresent the total funds invested.... (They tell us we lent £100, they tell the borrower we lent £50). Ma ybe we should stop.
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