LendingClub (NYSE:LC) announced that it has signed a definitive agreement to acquire Radius Bancorp, and its wholly owned subsidiary Radius Bank, (together “Radius”) valued at 185 million USD. LendingClub says Combining Radius and LendingClub will create a digitally native marketplace bank at scale with the power to deliver an integrated customer experience, enabling consumers to both pay less when borrowing and earn more when saving.
Radius is an online bank founded in 1987 and based in Boston, MA, with more than 1.4 billion USD in diversified assets. Its platform provides features such as check deposit, bill pay, card management, and a personal financial management dashboard, as well as open APIs to offer “banking-as-a-service” (BaaS) functionality to leading fintechs. In addition, the company offers commercial lending options for businesses, and treasury management services for pension funds, unions, municipalities, and non-profit organizations.
‘This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems and where the success of LendingClub is aligned with the success of our customers,’ said Scott Sanborn, CEO of LendingClub. ‘By combining with Radius, we will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.’
‘LendingClub has always been a fintech innovator, and I look forward to leveraging the strengths of both of our talented teams as we usher in a new era in banking,’ said Mike Butler, Radius’ President and CEO. ‘We are excited for our employees to operate our virtual banking platform with more resources and for our clients to gain access to an industry-leading lending product. This is a perfect marriage, with LendingClub bringing the leading digital asset generation platform, and Radius contributing a leading online deposit gathering platform, to position the combined company for long-term success.’
The combined entity expects to be substantially accretive with a cash payback of the purchase price premium and all costs in two years. The purchase price is subject to certain adjustments set forth in the definitive agreement, and the transaction is subject to regulatory approval and other customary closing conditions and is expected to close in the next twelve to fifteen months with benefits starting to materialize immediately after close.
Further, to facilitate compliance with federal banking regulations and prevent closing of the Radius acquisition being delayed or disrupted, the LendingClub Board of Directors has adopted a Temporary Bank Charter Protection Agreement, also known as a stockholder rights agreement, and approved a dividend distribution of one purchase right for each outstanding share of the Company’s stock as of March 19, 2020. The agreement is intended to deter stock positions in excess of certain thresholds set forth by the Federal Reserve under the Bank Holding Company Act. Specifically, it provides for the dilution of any person or group of persons who acquire:
(i) 25 percent or more equity interest in LendingClub or (ii) 7.5 percent or more of any class of LendingClub’s voting securities. This threshold automatically increases to 10 percent as set forth in the agreement.
Anyone already above such thresholds is grandfathered in at their current levels. The agreement is effective immediately and will automatically expire on either the closing of the Radius acquisition or after 18 months, whichever is earlier.
The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Zopa and Ratesetter*. The total volume for the reported marketplaces in the table adds up to 690 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms. I removed Boldyield as the platform has paused lending and repayed all investors (including accrued interest).
Milestones in cumulative volume lent crossed this month:
I am looking forward to attending the P2P Conference 2020*, which takes places in Riga on June 19th/20th. If you want to go too, you can order your tickets using this link P2P Conference 2020* together with code Claus for 20% discount (click on ‘enter promo code’ on the page where you enter the ticket quantity).
I went to the conference last year and enjoyed it. You can read my article about it here.
This year I plan to arrive a few days earlier (on the 16th) in Riga, using the time to meet up with platform representives. I also plan to organize a lunch or dinner meetup for P2P-Banking readers so we can chat and discuss current p2p lending developments. If you are interested send me an email and I’ll inform you once the planning is further advanced.
The website is down. Several investors voiced complaints on Facebook, Twitter and forums, about not receiving withdrawals within 5 working days, the time-span that the company used to tell investors is the normal processing time. Social media profiles of several management members were deleted today. The European Crowdfunding Network reported them to authorities after receiving multiple investor complaints.
The platform Envestio was launched in spring 2018 and promoted business loans of a wide variety of types (crypto, real estate, working capital, …). Founded by management with Latvian origins the platform was officially run by Envestio SI OÜ, a company registered in Estonia. Business loans (not consumer loans!) are currently not subject to specific regulations in Estonia.
Initially most of the offered projects came with loan sizes of 100K EUR to 300K EUR, but recently offered projects got much bigger. Offered interest rates where high, often around 20%. Shortly after the start, Envestio started to offer a ‘buyback guarantee’ (later renamed ‘Repurchase Guarantee‘) under which it would repurchase loans prematurely for a fee of 5% should the user request it.
To date Envestio seems to have collected around 33M EUR of investor money from about 13,000 investors throughout Europe (number according to Envestio website before it went down). Analysing web traffic, which probably correlates to investments, I would estimate that most of the investors came from Italy, Denmark, Spain, Germany and Portugal.
All seemed to go well for Envestio. Certainly the investments looked extremly high risk. I never invested as it was way beyond my risk appetite, but nobody suspected a scam.
In summer 2019 the company announced it was sold to a new owner.
Then there were allegations from an anonymous Twitter account (@RPeerduck, meanwhile deleted), published on Dec. 18th 2019. These linked the new Envestio COO to fraudulent promotions for an investment scam years ago. I asked the Envestio management for comment and received an email explanation on Dec. 20th, 2019, in which the COO said ‘… At the same time, the only personal experience in this sphere that I have is making a presentation of crypto-project, management of which was able to prove that their company can be trusted and does not have any signs of scam at the moment of making this presentation.. ‘. I did not find the offered explanation convincing at all.
Combine that with a media article in the Latvian press where a team member of Envestio was accused of misconduct in a former job (she denied any responsibility or misconduct), that left me wondering if Envestio is complying with all legal obligations.
All these bits of information were discussed on various forums. Nevertheless many investors seemed undeterred. As late as yesterday many investors on Facebook were defending Envestio’s arguments. The last one was a DDOS attack by hackers that disrupted the service.
The last withdrawals payouts that users actually received according to investor postings, were requested on or before the morning of January, 12th.
The last statement Envestio published on its Facebook page yesterday reads ‘…Simultaneously with the recent concerns within the industry, we tracked repeatedly various technical attempts targeted to influence dramatically on stability of Envestio platform. They were performed through hacker attacks on our web site and platform’s internal structure and database.
At the same time, we noticed that destructive public relations campaign against Envestio has been initiated and which consisted of spreading knowingly false and unconfirmed information by numerous internet resources questioning financial stability and reliability of our platform, denigrating the reputation of the Envestio owners and key employees.
We tend to consider these attempts as a consistent and well-planned set of actions aimed to cause significant financial and reputational damage, as a result of which the Envestio platform should inevitably begin to experience substantial difficulties with current payments to its investors.
We assume that the ultimate goal of all these actions is to devalue overall Envestio’s business, and the subsequent potential raider takeover of the company or an attempt to eliminate the company from the industry, getting rid of as strong competitor. The implementation of the aforementioned scenario is evidenced by a number of factors and hostile actions that occurred precisely at the moment when a serious crisis of confidence reigned in the crowdfunding market and which actually was caused by the scandal surrounding the activities of the Kuetzal platform. …’
What options of actions do investors have?
Investors believing that they are victim of a fraud could complain to the authorities e.g. the Estonian police, email firstname.lastname@example.org . Clearly state what you are complaining about, provide documents, state your identity. I reached out to the press department of the police today, but have not yet heard back from them.
Investors could also elect to have a lawyer represent their interests.
EDIT: 23.01.: One team member posted claiming innocence/not knowing what was going on (I have no means to verify if the post is really from the person with that name)
EDIT: 23.01., 14:50: Statement from a press officer of the Estonian police in response to the inquiry of P2P-Banking: : ‘In the past few days, the Estonian police have received several complaints regarding the crowdfunding platform Envestio. We are currently working to specify all details, but there is no investigation underway. However, if signs of crime do surface, we will start an investigation.Head of the Fraud and Economic Crime Division of North Prefecture Juhan Ojasoo: „Not every unsuccessful investment is fraud, however, if one really believes they have been deceived, we encourage to get in touch with us.“
A statement can also be submitted via e-mailing email@example.com and describing the case in as much detail as possible. We ask to provide contact details, amount of money lost, dates for transacations etc.
We also advise checking the Estonian Financial Supervision and Resolution Authority website for alerts prior to investing in any company: https://fi.ee/en/alerts.’
EDIT 24.01., 14:59 There are serious concerns (source) too, regarding the Estonian platform Monethera. Monethera has claimed a relationship in the past with Richly Pacific International Ltd, from Hong Kong, register number 1543697. A search in the document register shows that this company was dissolved in December 2018 already. EDIT 24.01. 21.32: Monthera stated ‘It’s a mistake and we already contacted Hong Kong companies register’
EDIT: 24.01. 17:35 Further concerns surfaced about Wisefund, a company with a model that has similarities to Monethera. An investor claimed a borrower listed on Wisefund denies having asked for a loan . There is a statement that Wisefund gave to another investor as an explanation, which does not convince me personally. You can read about this here.
EDIT 24.01. 18:03: J. V. (name shortened) on FB has shown a direct connection between a team member on Monethera and Envestio. The team member owns 50% of the sponsor Baltic Real Estate Holding (Barona 72 sponsor) which was a project on Envestio.
EDIT: 29.01.: 15.23: Update by Estonia police to P2P-Banking.com: ‘This week Estonian police began a criminal investigation regarding Envestio. The case is being investigated as investment fraud.‘
Head of Economic Crime Bureau of Central Criminal Police Leho Laur told P2P-Banking: ‘We have received a large number of appeals from people who have invested into the crowdfunding platform Envestio. Majority of the appeals are from people outside of Estonia. We are currently working through the statements received and communicating with other Estonian investigative organisations, who have also received complaints regarding Envestio. We know that the number of people who have put their money into Envestio is even larger, thus, we are likely to receive more complaints.
Our first objective in the investigation is to find out wheter it was fraud and the platform was created with the purpose of deceiving people or the website was closed due to a bad investment. It is also important to identify the people connected to this company and determine, wheter the crime was committed in Estonia or elsewhere. This is an investigation that has many parties and we will be cooperating internationally as well.
The Economic Crime Bureau of Central Criminal Police is working to establish how money was moved between accounts. Usually, in international fraud, the money is quickly moved between accounts in different countries until it is withdrawn through an ATM. Due to this, the chance to recover the money is small.
Most active crowdfunding platforms are trustforthy, but we recommed to always check where you are placing your money.‘
State prosecutor Sigrid Nurm told P2P-Banking: ‘Before investing into a company, it is necessary to do some background work and check where exactly the money will be placed. A promise of a high return and claimed amount of people involved or money invested, should not be viewed as guarantees. We recommend to look past advertisements, social media posts and websites, and to look into the background of the company in more depth. Look into open source registries, consult with your home bank or a local Financial Market Supervision Authority. It is also important to remember that every investment carries a risk and losing money does not necessarily mean that it was fraud.
A statement can be submitted by e-mailing firstname.lastname@example.org and describing the case in as much detail as possible. We ask to provide contact details, amount of money lost, dates for transacations, description of what happened etc.
Currently we have no reason to believe that the two platforms, Kuetzal and Envestio are connected.‘
EDIT 29.01., 21:48.: After looking at documents compiled by Envestio investors on Facebook regarding the status of individual loans I believe the potential damage caused by Envestio is closer to about 22 million EUR (plus uninvested cash lying in accounts) This is because at least 13.98 million EUR loans are in the status ‘repaid’ I assume that investors mostly reinvested (or withdrew) that money. While the 22 millions are lower than the 33 million EUR mentioned at the top of the article, it is still a huge amount.
EDIT: 31.01., 18:45: Estonian police publishes a ‘FAQ’.
EDIT: 02.02.: According to a press article, Latvian police have not opened an investigation but promises to support Estonian police if necessary
The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Ratesetter* and Zopa. The total volume for the reported marketplaces in the table adds up to 594 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms. This month I added Boldyield*. I removed Landbay (institutional only now) and Lending Works (monthly data not available anymore).
Milestones in cumulative volume lent crossed this month:
British p2p lending marketplace Thin Cats* announced that it will cease to offer new loans to retail investors. Thin Cats had facilitated about 556 million loans to UK business clients on its marketplace.
UPDATE: The headline has been edited compared to an earlier version to clarify that the company only stopped to offer retail p2p loans. This confusion resulted from the fact that the announcement below made no mention that the company will focus on institutional clients in future.
The Thin Cats announcement reads:
You have probably noticed that the number of new loans for investment on the P2P platform operated by Business Loan Network Limited (BLN), one of the ThinCats Group companies, has fallen significantly over the last two years.
Following a thorough review, we have concluded it is no longer cost effective and practicable to raise funds in this way, so have decided to close the P2P platform to new business and initiate a run-off process for existing investors.
This proposal has been discussed with the Financial Conduct Authority (FCA) and we have made a voluntary request to the FCA that the permissions to operate an electronic platform be closed to new business.
Our decision to initiate the ThinCats P2P Platform run-off has had the following impacts which became effective at 12.01am on 9 December 2019.
No new loans will be offered on the ThinCats P2P Platform The secondary market has closed and any loan parts listed for sale at the time of closure have been cancelled No new accounts, including ISA accounts, can be opened No new lender deposits can be accepted
Please note that investors can continue to log in to their account(s) in the usual way until such time as their account closes as part of the run-off process.
Crucially all of our existing systems and controls will remain in place to ensure investors’ interest and capital is collected when due or otherwise actively recovered. Investors can continue to withdraw any cash balances to their nominated bank account following the usual lender withdrawal request process. It is no longer possible to add new funds to your account(s), although loan repayments collected on your behalf will continue in the normal way.
The effect on different categories of investor is detailed below:
1. Lenders holding performing loans
Lenders with status “A” loans that are performing as expected will continue to receive interest and capital repayments in line with the original loan schedule. We would encourage you to withdraw your cash balances periodically.
Following the closure of the secondary market, you can no longer buy or sell any loan parts and any loan parts currently listed for sale will be cancelled.
For any performing loans that may subsequently become non-performing, these will be treated as described in section 2 below.
2. Lenders holding non-performing loans
For lenders with loans that are not performing in line with the original loan schedule, we will continue to endeavour to maximise the returns to lenders through our normal monitoring and recovery process. There will be no additional impact from the introduction of a run-off period and we will continue to email you with updates on specific non-performing loans.
Once we have secured the maximum value from non-performing loans, lenders will be asked to withdraw any remaining cash balances and close their account.
3. Investors in Diversified Loan Portfolios (DLPs)
DLPs have a minimum Target Term, typically two years, during which it is not possible to sell underlying loan parts. Following the closure of the secondary market, performing loans within DLPs will no longer be offered for sale via the secondary market towards the end of the Target Term. Payments from these loans will, instead, continue until the loan matures.
We will contact you separately with the proposed run off schedule for each DLP that you hold and you will continue to receive DLP statements on a quarterly basis.
Any non-performing loans within a DLP will be treated as described in section 2 above.
4. Registered investors with funded accounts but not holding loan parts
For investors that have cash balances in their ThinCats account(s) but do not hold any loan parts, we encourage you to withdraw your cash to your nominated bank account as soon as possible in the usual manner.
Once your account has a zero balance we will close your account. If you do not withdraw any remaining cash balances, we will contact you again to remind you of the need to transfer all monies out of your account.
If you hold a loan or DLP within a ThinCats ISA, we will contact you separately with details of the options open to you. It is no longer possible to open a ThinCats ISA for the current tax year.
6. ThinCats Lending Clubs (“TLC”)
All TLCs have now come to the end of their term and those that remain open are still to receive future realisations from non-performing loans in each portfolio.
Once all possible realisations have been achieved the respective TLC will be closed and you will be notified accordingly.
The main impact of the platform run-off process is that no new loans will be offered on the ThinCats P2P Platform and it is no longer possible to open a new account.
In most other aspects, other than the closing of the secondary market, the platform will continue very much as now: you will continue to receive interest and capital repayments for performing loans and we will continue to monitor loans and invoke recovery procedures in the normal way. You will be able to log in to your account in exactly the same way.
We are committed to treating all customers fairly during the run-off process and recognise it may raise a number of questions with investors.