TrustBuddy, the first listed peer-to-peer lending platform in the world has suspended operations after new management found serious indications of misconduct.

Among the list of regulation, breaches are topics such as using lenders’ capital without their permission, creating a discrepancy between the funds owed to lenders and the available balance. 

Due to this ongoing internal investigation, the Swedish Financial Supervisory Authority – Finansinspektionen – has ordered TrustBuddy AB to suspend their services until further notice. For lenders and borrowers on the platform this has resulted that deposits and withdrawals are effectively frozen

As reported in the Financial Times, “the platform found lenders were owed £3.6m more than was held in client accounts, while £3m loaned to borrowers was not assigned to any lender. The problems occurred in TrustBuddy’s core short-term consumer lending operation, effectively a payday lender.”

According to Judith Evans of the FT, “The UK has pioneered regulation specific to peer-to-peer and is in the process of bringing platforms into a full regulatory regime, including rules on client money segregation and “living wills” in case platforms collapse.”

As the peer-to-peer lending industry has grown across the globe, the importance of a solid regulatory framework and corporate governance has become of increasing importance. The UK has seen a dramatic growth in p2p lending platforms during the past few years and with the attention of the FCA now focused on the sector, this should lead to a more stable environment for lenders and borrowers.