Property peer-to-peer funding platform Lendy has collapsed leaving investors holding around £160 million in outstanding loans.
Lendy pooled funding from private investors with pledges of up to 12% returns.
The money was borrowed by homeowners and developers and secured against property – most was as bridging loans.
Around £90 million of the total funds borrowed is in default as borrowers have failed to make agreed payments.
The platforms 600 investors are believed to face losses of tens of millions of pounds.
Lendy collapsed after intervention by City watchdogs the Financial Conduct Authority. The FCA feared the platform was failing to uphold the expected standards of a regulated firm.
The FCA had been looking at Lendy since the turn of the year and placed the platform on a watch-list.
A notice on the Lendy web site explains administrators have been appointed.
“We will shortly be issuing additional information so please watch this website for updates,” says the notice.
“The administrators have set up a dedicated email address and phone number for creditors to contact the administration team.
“The address is firstname.lastname@example.org and the phone number is 0203 858 9653.”
The question for the fledgeling P2P industry is Lendy a sign of things to come or a one-off event?
Few P2P lenders are protected under the Financial Services Compensation Scheme (FSCS), so investors stand to lose all their money if they cannot pursue the debts through the courts.
The FCA argues some P2P lenders are exposing investors to too many risks and wants to restrict the market to sophisticated investors – those with funds to lose and knowledge of how investments work.
This goes against the spirit of P2P lending, which aims to democratise investments by attracting investors with smaller sums to stake.