When taking decisions about my investments, I always try to figure out how it might perform in the next months, quarters, and years ahead. I believe P2P lending will have a bright future by disrupting the financial services industry. Crowdfunding and peer-to-peer lending platforms are smashing old business models and democratizing the access to financial and investment information to individual investors to help them overcome the current low-interest rate environment. But in a era of fraud and crony capitalism the key for the future success of the industry is in the courage of individual whistleblowers.
The Need for P2P Whistleblowers
Whistleblowers have become necessary for maintaining law and order within a industry that is still living in a non-regulated environment. When authorities fail to protect small investors, they become easy victims of a criminal business model that is eroding all trust in a industry that can become the cornerstone of the financial progress for small investors in a decade of low-interest rates.
Whistleblowers get a bad rap because you, as investor, live in denial of taking bad decisions. You don’t what a P2P platform collapse, and the first reaction to a whistleblower alert is a direct accusation that he or she has something to profit out of the process. This can happen, however, if performed ethically and responsibly, it exposes blatant criminality and corruption, improves the P2P market efficiency, and discourages repeat offenders from trying to pull once more the oldest tricks in the book. Whistleblowers should be hailed as superstars by the community.
Roasted Peerduck is an anonymous Twitter account launched in November 2019. This particular whistleblower achieved, in a very short period of time, a transformative approach by investors on their due diligence practices. His actions directly lead to Kuetzal, Envestio & Monethera frauds collapse in the beginning of 2020 and is putting pressure in a number of others, such as Grupeer or FastInvest, becoming the trigger for a bigger discussion about the practices of Baltic P2P platforms.
I’m among the investors that lost money, however, I must recognize that I was lazy and greedy. My losses probably would be much bigger if not for his alert. For that, thank you Roasted Peerduck. I joined the investor groups that are actively looking to find a way to fight back. I’m just one among hundreds that faced the cruel reality of seeing their savings disappeared into the pockets of “invisible” criminals that without Roasted Peerduck would just grow in number.
A P2P Fraud Detection Framework
The risks in P2P are significant. Now more than ever, as investors we must take every whistleblower claim into account as a P2P platform can make our investments go to zero after being exposed as a stone-cold fraud. We must create a P2P fraud detection framework, replicating the processes of past frauds and building a knowledge base of red flags that any beginner investor in P2P can recognize. But even so, the only manner we can win against the most complex frauds is by listening to any whistleblower who raises legitimate concerns.
An unexpected result from the whistleblowers alerts was the immediate creation of P2P investor action groups. They came together to collect evidence, organize, raise funds, and push for justice. We need to thank whistleblowers for this as well. We should be impressed with the power of the crowd when mobilized around a single objective: justice. But we need to push further, and use this new found strength to push politicians and decision makers for justice reforms capable of setting up the necessary protections for small international investors to be able to avoid frauds, and build a framework of financial transparency capable of generating value to the entire P2P industry ecosystem.
I wouldn’t be investing in P2P loans unless I thought it’s a simple, viable and profitable asset class, with a great future ahead. In any case, I’m critically aware of the industry risks, frauds and lack of regulation that make almost impossible to any institutional investor to add this assets into their portfolios. Only with a constant vigilance and investment diligence, following a work ethic far from the passive storytelling the entire industry is sharing, and the individual courage of P2P whistleblowers we will be able to avoid the criminals that destroy the community trust.