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Shitstorm + Portfolio update (loans Jan. 2020, stocks Q4 2019)
03/02/2020
Shitstorm + Portfolio update (loans Jan. 2020, stocks Q4 2019)
Kuetzal and Envestio were scams, Boldyield freezed operations. How did it happen, and what next? And a message to other platforms...

Table of contents


Apologies

I wish to open this post with three apologies.

First, to fellow victims of Envestio. While I never consciously encouraged anyone to invest, my trust in this platform may have reinforced your own. I feel bad not only for my own loss, but also for yours. This is the main reason I took a central role in the community effort to bring the people responsible to justice.

Second, to bloggers, Youtubers and others whom I criticised for ringing the alarm bells regarding Envestio. While I still think we need to be careful not to spread false panic, in this case the panic was obviously justified, and you were the ones to call it. You were right and I was wrong.

Third, to myself. I had already suffered significant losses through investing, and promised myself to be be more careful. I got sloppy in my research and due diligence – and need to do better.


How did it happen?

In hindsight, the warning signs surrounding Kuetzal and Envestio seem embarrassingly obvious. So why did so many of us ignore them? Were we so driven by greed that we were willing to blindly invest in anything? Were we brainwashed by evil bloggers looking for affiliate commissions? I believe that the answer is more complex.

K and E were not simple scams like the “Nigerian Prince” that we have all come to recognise and ridicule. No, these were complicated frauds, relying on an intricate web of shell companies, bank accounts, fake borrower websites, and even fake identities. Most significantly, they excelled where most online scams fail: Building trust through personal interaction.

This is the thing that pisses me off most. It’s not the money, it’s the fact that they betrayed our trust. Being honest people ourselves, we assumed that anyone who was willing to answer our questions and look us in the eye – was honest. So they gave us smiling photos, LinkedIn profiles, social media presence, detailed responses to questions, and blogger meetings (including on-sight visits to borrowers, a magic feat which we still haven’t been able to crack). In short, they used our virtues to play us.


Know of other scams? Blow the whistle and save yourself

We’ve been fooled once, but we won’t be fooled twice. There is a lot going on behind the scenes now, which you may not know about. Groups of investors are cooperating, investigating, tearing down the veil of lies erected by these platforms, stripping bare the personal lives of the people involved, revealing ugly truths, organising and presenting this data to the police in nice stacks.

Under this avalanche of information, the police quickly launched official investigations. They have enough to look into everyone involved with Envestio, past and present, owners, managers, and staff. Everyone. These people may not realise it yet, but they are facing investigation, trial, possibly conviction, and likely the destruction of their professional reputations and careers.

We are more or less done with Envestio, and are getting bored. We are many, we are organised, we are intelligent. We have different skills: IT, finance, legal. We have contacts all around the world. And we are turning our focus on other platforms. P2B, P2P, loan refinancing marketplaces. We are dissecting data, making sure not to fall to the same traps; digging up dirt, looking at people. And so help me God, you do not want your name and address to be on the next list we hand over to the cops.

Blow the whistle – Anonymous tip line: https://p2pscam.com/

If you have anything we should know about any crowdfunding platform – do the moral thing and come forward. If you work for a crowdfunding platform involved in any sort of shady business – there is already a clock over your head. Don’t think about losing your job, think about losing your career, reputation, or freedom. Share what you know and get legal protection and a chance to survive the fallout.


Going forward – bigger, better, stronger?

In the wake of recent turmoil, the young platform Boldyield declared that it was returning funds to investors and freezing operations. This can be interpreted as a way to avoid close scrutiny, or it can simply mean that they came late to the party. The dance floor was already crowded, and as soon as people started tripping over and shoving for the door – the last to join was the first to be pushed out.

While no one wanted to see a platform fail, “survival of the fittest” is a natural step in the development of this market, and gives a bit more room for stronger platforms… as long as they retain investors’ trust. All platforms need to keep out of trouble for a few months for things to calm down, and they need to improve in the long run.

Several platforms released official statements, some of them just words, others actually announce long-awaited changes. For example, Grupeer has declared 2020 “the year of transparency”, but it remains to be seen how they go about it. Crowdestor has committed to increase transparency regarding borrowers, partners, team members, and the due diligence process.

PeerBerry was my personal favourite of the month. First, they published an overview of the 2019 performance of their main loan originator, Aventus Group. The numbers are impressive, showing astronomic growth alongside a net profit of €12.6m. To put it in perspective: Mogo, the highest-ranked originator on Mintos, made about half this number in 2019. Of course, we still need to see Aventus’s audited financials.

Second, PeerBerry’s awesome CCO Rita Simanavičiūtė responded to investors’ questions by dropping a huge information bomb on Facebook, increasing platform transparency by about two levels in a single thread. I can’t summarise all she wrote, so just to give you a taste:

The questions were asked by blogger Robin Seetz, whose review of PeerBerry you can find here (Dutch).

My point being: There are still good platforms out there. Even if they need to improve, there is no reason to throw the baby with the bathwater.


Portfolio update – loan financing (January 2020)

This time I’ll let the numbers do the talking:

(Click to enlarge on mobile)

If you decide to join any of these platforms (excluding Envestio…), you are welcome to use my bonus sign-up links.

Affiliate commissions earned this month: €15 from EvoEstate, €3 from Lenndy, €1 from Grupeer.


Portfolio update – hedge fund (Q4 2019)

Here are my results from last quarter:

(Click to enlarge on mobile)

A disappointment compared to the S&P’s phenomenal rise, but as usual, I hope to get the advantage if and when the stock market drops.

Speaking of which… This is a very interesting time: Can a virus be the trigger for the next significant recession? At least it isn’t directly related to loans, as opposed to the subprime mortgage crisis.


This post is not meant as investment counselling. I am just a fellow investors sharing his thoughts and experiences.

Also, this post does not encourage or endorse any illegal action. It deals with assisting law enforcement agencies through official, legal channels.

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