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Private Lending (18) – The Closest I’ve Ever Been to a Documentary
This time, I will be sharing an application which had many twists and turns. When we first looked at the deal, we felt the appraisal was inflated, so we rejected it. But then, after a while, the broker came back and said the borrower was willing to use another property as collateral. This showed some sincerity, so we took a closer look. With two collateral properties, a large house and a small apartment, the combined LTV was almost there, and the asking price and timeline seemed reasonable.
Then the interesting thing happened. As per usual, we went on with our checklist, and somehow found a press release stating that a major bank has frozen one of this person’s business accounts for some unknown reason.The statement was short with only a few lines of content. Coincidentally, the short statement mentioned a platform I had watched a documentary about many years ago, specifically about the founder of this platform disappearing suddenly while traveling in India (apparently due to food poisoning), and then a large amount of currency on the platform went missing, with many users, including prominent figures in the blockchain community, trying to trace these wallet addresses. Most ended up losing their money, and doubts still linger about the founder’s death. In short, it’s an unsolved case.
This was a big red flag. If I hadn’t liked watching documentaries, we might have overlooked this clue. We contacted the broker first to ask if there was any truth to it. The broker said, absolutely not, it’s just a common name, a coincidence, the borrower doesn’t have any company, and was just an ordinary guy in his 60s.
Of course, we took that with a grain of salt, we just wanted to gather more information. We also investigated the related companies mentioned in the statement and found the address to be very familiar—it was exactly the address of the second collateral property! So if there had been only one property initially, it wouldn’t have been enough to prove it, but now we had solid evidence.
The funniest part was when we looked up various opinions about that platform and stumbled upon a Reddit thread. When we clicked on it, the borrower’s face (taken from his social media) and his house (the house that was in the application submitted to us ) were prominently pinned at the top of the thread, with people in the comments cursing him, saying his company was the service provider for the disappeared platform and had transferred millions (matching the bank statement) from the platform’s funds, while shamelessly flaunting his house on social media.
We packaged the evidence and sent it to the broker. And then, that was it, there was no further response, and we never heard from that broker ever again 😂
I’m very fortunate that I have so many hobbies, and it turns out they can be useful in due diligence. Next time, let’s talk about a checklist for doing private loans, which is a big summary. If you want to do it yourself, you can just go through the checklist item by item for due diligence.