Lendy investors are raising money to take legal action over the way administrator RSM plans to distribute recovered funds.
The Lendy Action Group (LAG) was set up by disgruntled Lendy investors in June 2019, after the peer-to-peer property development lender fell into administration in May that year.
It is looking to raise at least £25,000 but as much as £75,000 to pay for legal counsel in order to challenge RSM’s ‘recovery waterfall’ in the courts.
Lendy initially operated a structure whereby investors lent to Lendy itself, which then gave the money to borrowers, known as model 1. However, this was not deemed as a P2P arrangement and a new structure – model 2 – was set up from 2015, meaning that investors began funding the P2P loans directly.
RSM has decided that the model 1 group will be defined as creditors, but the model 2 group is investors, meaning that they will be treated differently with regard to the distribution of recovered funds.
“It has recently come to light that RSM intends to apply a recovery waterfall that substantially disadvantages you in favour of general creditors including shareholders of Lendy,” LAG said.
“LAG has now determined that it is in the interests of model 2 investors to take legal action to challenge the application of this unjust waterfall in the courts. To do this we must raise funds to hire specialist support by engaging a qualified solicitor.”
LAG has suggested a contribution to the fund of £1 for each £1,000 invested, but said that investors should contribute as much as they can afford. There is a minimum donation of £5.
£12,340 has been pledged so far from 201 investors.
It the fund fails to raise £25,000 in 30 days, all contributions will be returned and no legal action will be commenced.