Red flags in P2P investment - how to recognize a fraud?

In recent years, the P2P market has become a competitive alternative to traditional assets due to attractive returns on investments, their predictability (yield and term are known in advance), ease of management and low volatility. But any investment carries some degree of risk, and in the case of P2P, this is primarily a lack of transparency and regulation. In today's review, we will talk about what can be hidden behind the activities of a P2P business and how to recognize fraudulent platform schemes.

The Chinese P2P lending platform Ezubao, which was a Ponzi scheme in disguise and faked 95% of its online loans, was a prime example of a massive fraud. The scheme divided long-term lending projects into several short-term loans and used funds from new investors to pay system participants. All this predictably collapsed due to the use of a Ponzi pyramid scheme. 

The list can be continued with Jinxing Investment and Rong Zuan Dai (China, 2015), FastInvest (UK, 2018), Kuetzal (Estonia, 2019), Grupeer (Latvia, 2020) and others. Fraud can manifest itself in different countries, at different stages of work with investors and regardless of platform age. Nevertheless, we can identify common features that should alert the investor and require them to pay more detailed attention to the platform.


This is a classic example of phishing, when either the entire website of a well-known company or a specific payment page is imitated using a copy page. To recognize such sites, it is enough to carefully look at their address, which does not match the official one. A private, but no less serious, case is the imitation of a 3D Secure payment protocol page. In such cases, it is necessary to pay attention to the source of payment in the SMS message from the bank with the transaction confirmation code. In P2P lending, all transactions go through bank payment systems, for example, “Visa” or “MasterCard”. Therefore, a real message might look like this: “ROBO.CASH*VISA*5412: 633496 your code”, a fake one “R0B0CASH*P2P*MONEYSEND*5412: 633496 your code”.

Lack/falsification of contact information

As a rule, the section "Contact us" includes at least a phone number, address and email. Today's "good tone" also includes other forms of feedback: widgets with virtual online chats, instant messengers, links to social networks and informative FAQ sections. The scarcity of contacts (not to mention their complete absence), as well as the delay in responses, is a direct warning signal that the platform’s policy does not seek openness.

Suspicious cash flow distribution scheme

The already mentioned Ezubao project can serve as an example. The site reported that the future profit of investors is provided by funds from new participants. Despite the fact that it was called P2P lending, it is obvious that, like any Ponzi pyramid, such a scheme is doomed to collapse due to a trivial lack of new investors.

The overall quality and attractiveness of the site

If the platform website makes you feel bad or feels like it's a template, then it might be worth refocusing your attention on finding better options. Companies spend a lot of money to look pretentious and work as functionally and efficiently as possible. Every quality project is unique, so it should look the part.

Insufficiency of information on Internet resources 

Usually, serious P2P projects actively use the media space. On the part of investors, the exchange of information and opinions is also an essential component of the P2P community as such. Against this background, silence regarding a particular project is a very alarming signal.

Falsification of legal and financial data

Until the European P2P regulatory framework ECSP is created, there is no full-fledged unified legal framework for the European P2P industry. National requirements for the legal nuances of running a P2P business vary significantly. But even without going into the details of industry regulation in certain countries, as a legal entity, the platform must surely be registered. Information about this is usually contained in the section "About the company" or at the bottom of the main page.

Simple registration

As stated above, P2P, like any other type of investment, is associated with risks. Specifically in the industry, P2P investment is associated with the possibility of non-return of invested funds, either on the part of the borrower or on the part of the intermediary platform. Serious fintech platforms identify their customers through the KYC (Know Your Customer) procedure. KYC can be called a set of procedures and tools within the overall policy of AML / CFT (Anti-Money Laundering Counter-terrorist Financing). Such a policy of identifying users of online platforms is necessary for the safe movement of funds and is recognized throughout the world.

High threshold for initial investment

If a P2P platform requires 1000 or more euros of initial investment, although this is not an unequivocal negative indicator, it should be a red flag. Reason: modal (most common) level of minimum initial investment in the industry is about 10 euros.

No buyback guarantee

A buyback guarantee means a situation where a P2P platform automatically redeems an investor's already defaulted credit instruments. In other words, this is an analogue of insurance against non-return of invested funds. For example, on the platform, buyback comes into force if a loan is overdue for more than 30 days. On the 31st day, the investor receives back their invested funds along with interest, which is the sum of the loan term and the period of its redemption.

When choosing a P2P platform, we recommend paying attention to the above characteristics. If a platform looks suspicious after analyzing one of these criteria, it does not necessarily mean that it is a 100% fraud. However, if there are several “red flags” at once, then it is better to find another one for investment. We hope that this article will be a useful cheat sheet for you in deciding to invest in a new platform.

Robocash d.o.o (“Robocash”) is a company registered in the Republic of Croatia under registration No. 081224371, with legal address at Petračiceva 4, Zagreb, Croatia, 10110.

Robocash is not regulated under any financial services license. When you invest on Robocash, you buy claim rights for loan receivables and investments in loan receivables are subject to risks. We advise diversifying investments and carefully evaluating the risks.