More than 2,000 investors are set to take legal action against collapsed Estonian peer-to-peer lenders Envestio and Kuetzal.
Both platforms have been declared bankrupt and are the subject of a fraud investigation by Estonian police. European law firm Magnusson is now representing investors in efforts to recoup up to €15m (£13.5m).
“The people behind Envestio and Kuetzal have made big efforts to hide the money trail, used various shell companies in and outside of the EU, converted it to cryptocurrency and then back,” Denis Piskunov, a lawyer for Magnusson who is leading the claims, said.
“It can be assumed that attempts will also be made to obstruct or otherwise torpedo the court proceedings with fictitious claims.
“Getting the money back won’t be a walk in the park, but we remain optimistic.”
The legal action group is made up of 600 Kuetzal investors aiming to recoup €4m and more than 2,000 Envestio victims with €11m in outstanding funds. Investors raised the alarm on Envestio in January after it seemingly shut down while still holding €33m (£27.87m) of their funds. Meanwhile, concerns emerged over who owns Kuetzal and who its borrowers really are.
The Estonian police force has since launched a fraud investigation into the platforms. Piskunov added that the lack of harmonised crowdfunding regulation in the EU was giving rise to scammers.
“At present there is no bespoke regulation in Estonia, as well as many other EU countries, pertaining to crowdfunding beyond existing law,” he said.
“This has allowed crowdfunding to develop into a successful investment model, but as the crowdfunding market has grown and more people see this as a good way to invest their savings, a need for harmonised regulation and better protection for investors has grown as well.
“The lack of such regulation has definitely allowed scammers to take advantage but we don’t see crowdfunding as being especially more prone to scams.
“People will always need to remain critical about with whom they trust their money and where they invest.”
Harmonised regulations that introduce investor limits and appropriateness tests for investors as well as rules on who can run crowdfunding platforms are expected to be introduced in the EU next year.