Swiss fintech Advanon has been hit by a million-dollar fraud scheme. The case is emblematic of the risks involved in the peer-to-peer economy.
«Building trust is key for fintechs», Phil Lojacono, co-founder and CEO of Zurich-based start-up Advanon told finews.ch-TV in an interview earlier this year. Advanon may see that trust wiped out in one swoop
The fintech firm which, which allows companies to secure financing against its outstanding invoices, has fallen victim to a massive fraud scheme, Advanon said on its corporate blog.
Falsified Invoices
Specifically, a Swiss trading firm sold fake invoices worth 2.4 million Swiss francs ($2.41 million) to investors on Advanon's platform. As many as 78 investors had been hit by the scheme, Advanon said.
«The fraudster acted with a lot of criminal energy and high level of criminal perfection», CEO Lojacono said. Advanon has collected data from its platform and handed it over to prosecutors, as well as informed Swiss financial regulator Finma.
Damaged Parties
Advanon said it always fulfilled its duty of care and acted with due diligence in brokering transactions on its peer-to-peer platform, and would seek to ensure that injured parties recoup their funds.
Lojacono said the move will prompt a change in strategy for Advanon, which will in future only allow institutional investors to use its platform. The pre-financing that Advanon facilitates represents a high-risk asset class – something Advanon has always emphasized.
High-Risk Assets
The alleged fraudsters applied so-called silent factoring in their scheme, or the sale of accounts receivable data without informing debtors. According to Lojacono, this process is inherently of higher risk than open, or transparent, factoring. Advanon said in future it will only offer a diversified portfolio in which the risks are dispersed across several invoices.
The case is a «serious setback», as Advanon admitted. It ranks among Switzerland's most successful finance start-ups and has secured prominent investors including private banking scion Eric Sarasin and Partners Group co-founder Urs Wietlisbach.
Advanon isn't alone: the peer-to-peer economy including crowdfunding, crowdlending, or initial coin offerings is rife with similar fraud schemes attempts. While investors have largely been left to their own devices on ascertaining the potential value of ICOs, other platform providers are obliged to attempt to weed out potential scamsters. The Advanon case is a timely reminder that continual efforts to do so are called for.
