Our goal is to resume Grupeer’s operation, thus we are informing you about the current status and planned actions as our priority is to renew the trust of our investors. Herewith we would like to share with you Grupeer’s legal audit results on the company’s corporate governance, anti-money laundering (AML), and risk procedures and the assessment of further development options. As well as, we have a new status update regarding the portfolio performance audit.
Identified issues are as follows:
1. Corporate Governance. During the audit, it was detected that Grupeer has a complicated and unnecessary related company structure, where some functions overlay.
2. Loan portfolio quality control. Currently, not enough resources are dedicated to debt collection and management.
3. AML procedures. Although Loan originators are being evaluated according to the AML procedure, there is at least 30% of investors who have made investments but they have not submitted the Know Your Client (KYC) questionnaire. Besides, the previous KYC does not correspond to the current requirements of the banks.
4. Licensing. Although the European Union there are no specialized laws to regulate the peer-to-peer lending platform industry, there are options to obtain a license from the local Regulator to ensure that operations become more transparent.
Based on these findings, Grupeer has established an action plan, thus next are:
1. Corporate governance.
While generally, such relation does not constitute a violation of law or other legal issues, in some instances, there is no reasonable economic explanation, why certain companies exist in the chain of loans made through the Grupeer platform.
Finsputnik Platforma is a fully controlled entity and does not produce any additional economic benefit, thus to minimize costs, it is planned to liquidate the company while transferring all rights and claims of it to Grupeer.
In regards to Primo Invest. Alla Kisik owns 50% of the shares of Primo Invest, however, corporate documents show that Alla Kisik has made this investment to secure the right of veto at the shareholder meetings and has never participated in the day – to day management of this company.
Since Alla Kisik does not have control over Primo Invest and can exercise only the right of veto at shareholder meetings, Alla Kisik will divest from Primo Invest and transfer her shares into independent management. Such independent management could be implemented through a trust or similar arrangement, which would be managed for the benefit of the investors.
Given that Grupeer within Portfolio performance audit has requested information from Primo Invest about the status of investments and planned next steps but never got any reply, it is plausible that at some point it may be necessary to take legal action against Primo Invest to ensure full disclosure of information, repayment of funds, etc., and possibly debt collection.
Changes of shareholders are required to avoid any conflict of interest and Grupeer has full capability to launch legal action against Primo Invest, if the loan originator will not fulfill its liabilities towards investors.
2. Loan portfolio quality control
To strengthen the independence and quality of the collection of funds processes carried out by Grupeer, the Company will separate collection/debt enforcement processes from other activities of Grupeer and make the administration of these processes independent from Grupeer’s management.
Independent administration of debt collection processes would ensure that all subjective factors, if such exist, are excluded from collection proceedings and the obligations are enforced with maximum aggressiveness and exclusively for the benefit of the investors.
While such separation is not a legal requirement, it was proven useful and efficient, for instance, during the 2008 economic crisis, when all major lenders separated their restructuring and debt collections departments from other activities and transferred them under independent management.
3. AML procedures
Grupeer investors are required to submit KYC updated questionnaires even if they had done that in the previous period. If investors fail to provide the information required by KYC procedure it could have negative consequences such as prohibition to make/perform any transactions with the investor, who has deliberately refused to comply with AML requirements, or, if it is not possible to associate specific transfers to a particular investment the whole group of investors (including ones, who have completed AML requirements), impossibility to obtain a license from the Regulator, refusal of the banks to effect any money transfers to and from Grupeer.
Currently, Grupeer’s legal advisors are looking into options, how to ensure repayment to those investors who have submitted their updated KYC questionnaire duly.
To ensure transparency of the operations and long term stability of the company, Grupeer will start the process of obtaining a license from the Regulator; the process might take 3 to 6 months.
PORTFOLIO PERFORMANCE AUDIT
Progress report 20.07
Primo Invest will be moved to the 4th loan originator’s group (please see the detailed split in groups here). It means that we will start legal actions against Primo Invest, Finsputnik/Lime Loans South Africa, and Right Choice Finance to collect the debt.
During its operations Finsputnik has carried out multiple investment projects – out of 42.2M EUR total investments: 33,7% (14,24M EUR) are fully repaid to investors, 43% (18.14M EUR) are ready to be repaid according to the schedule, 1,7% (0,7M EUR) – legal action, 21.6% (9.12M EUR) – assets claim rights consolidation under Grupeer.
Liquidation of Finsputnik will be carried out to make corporate governance processes leaner and cut costs.
Claims of the investors for following companies will be transferred to Grupeer: Finsputnik Platforma, Finsputnik/Cash-U Finance, Finsputnik/Mikrokasa, Finsputnik/Saules kredīts, Finsputnik/Pozyczka Pieniedzy, Finsputnik/Nord Card, Finsputnik/DoZarplati, Finsputnik/eMkopo, A24, Finsputnik/IbanCar World, and Finsputnik/StickCredit.
Repayment from these loan originators will be ensured according to the schedule as soon as we will renew operations of Grupeer’s bank accounts.
Regarding Finsputnik Investment projects such as Planeta Cash, Epic Cash, Monetria, and Lion Lender. Grupeer has requested an independent assessment of the most advantageous strategy for investors to recover the funds initially intended for the Russian borrowers Epic Cash, Monetria, and Lion Lender.
|Loan Originator||Required funding||Gathered funding||-% of required funding|
|Epic Cash||1’729’000 EUR||1’182’589 EUR||-31,6%|
|Monetria||802’000 EUR||499’012 EUR||-37,8%|
|Lion Lender||3’066’000 EUR||1’982’551 EUR||-35,3%|
|Planeta Cash||5’975’000 EUR||5’455’150 EUR||-8,7%|
These funds were consolidated under Planeta Cash, due to insufficient funding of the loans by investors and concentration of all principal assets, infrastructure and IT solutions specifically in Planeta Cash.
Currently, the most viable solution is Grupeer taking over the assets and keeping them until the COVID-19 restrictions are lifted to maximize the proceeds from realization of these assets.
Enforcement of buyback guarantees against Loan Originators has been put on hold until the time it is clear that the particular borrowers’ repayments will not exceed proceeds from enforcement of buyback guarantees, thereby guaranteeing that investors receive maximum under the relevant circumstances.
Please note, funds will be available for withdrawal only for those investors who have passed the updated KYC procedure. We kindly ask all investors who have not yet submitted an updated KYC questionnaire to do so as soon as possible, because only after we have all investor KYC information, we will be able to finalize AML & Risk policy updates with the banks and renew operations of our bank accounts.