Just weeks before the Mumbai Police began its investigation into the alleged fraud committed by the peer-to-peer lending platform, Quirky Technology, its former escrow agent had served it a showcause notice directing it to stop using its name as a trustee even after the end of their agreement.
Two directors of Quirky Technology in Sakinaka were recently arrested, on charges of duping nearly 1,200 people of at least Rs 32 crore.
Bandra-based Beacon Trusteeship Ltd, a debenture trustee, had entered into an agreement with Quirky Technology on August 23, 2017 to act as a trustee for its peer-to-peer lending activities and operate an escrow account for it.
On its website too, Quirky Technology has listed Beacon Trusteeship as being its SEBI-registered third-party escrow agent through which it carries out its loan disbursements and repayments.
Quirky Technology, which was founded in Sakinaka in March 2017, operates as a private money-lending company, where individual lenders can choose to give loans to a variety of borrowers. Escrow agents receive and disburse money to both lenders and borrowers registered with a peer-to-peer lending firm, holding the funds in a secured bank account.
On its website, Quirky Technology claimed that its escrow account functions “as a detached unit from the platform to ensure complete security of lender and borrower’s money. The complete end-to-end process is intuitively managed by the platform without human intervention.”
However, the Reserve Bank of India (RBI) published guidelines in October 2017 requiring peer-to-peer lending firms to operate two separate escrow accounts for funds received from lenders and for money collected from borrowers, and requiring the trustee to be mandatorily promoted by a bank. The agreement between the two firms also ended shortly thereafter, on January 6, 2018.
Beacon Trusteeship claimed that Quirky Technology continued to name it on its website as its trustee even after the termination of their agreement. After several email and telephonic reminders, Beacon sent a showcause notice to Quirky Technology on August 21 and demanded compliance within 15 days and also sent an intimation to the RBI.
“We have been receiving calls from potential investors that Beacon is a guarantor in case of default by any of the borrowers on the platform, which is in contravention of the NBFC P2P guidelines issued by the Reserve Bank of India,” Beacon’s intimation states.