Why I do not invest with Kuetzal. Scam, incompetence or just too many red flags? Here are my concerns.

Why I do not invest with Kuetzal. Scam, incompetence or just too many red flags? Here are my concerns.

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Kuetzal review 2019

I have until now only released the good interviews I had with platforms I trust. They are the most fun to write and focus on. I have been holding back on the bad ones. They are not so fun to write. In the large number of interviews I did, there were some that left me thinking: “I just cannot invest my money at this platform”. The meeting with Kuetzal was unfortunately like this. I have several concerns and reasons for why I will not invest with Kuetzal and I will sum them up in this article. 

I visited Kuetzal at the end of June 2019 and after the interview I decided not to invest with them. Below I share some parts of the interview, that was all part of my final decision to not invest with Kuetzal. 

Concerns about experience and use of specialists

Georg: 
Do you have any specialists in real estate at the law firm that you outsource to, or do you have to go to another company when you have a real estate project? 

Alberts: 
Honestly, I don’t know. I think so, but I don’t know every lawyer’s competence. 

This was the first question where I definitely expected another answer. As Kuetzal has 12 real estate projects out of 29 in total on the platform, I would expect them to have some kind of real estate experts supporting their team, as they clearly have very little in-house competence in real estate. Every platform that has real estate projects, even Kuetzal, agrees that finding good and solid real estate objects is not easy and there are not a lot of them. So they need help in picking the right ones for the investors on the platform. I definitely expected the CEO to know about the law firm’s competence in working with real estate projects. 

Georg: 
Before an interview, I usually take a look at LinkedIn to see what kind of work experience the people behind the platform have. When I look at your profile, you have very little experience. You were a Back Office Manager at T-PRESTA for six months, an Intern at Viventor for four months, and four months as a Financial Operator at TWINERO. I see that all of your work experience is at the same time you took your Bachelor’s degree from the European University. Was this full-time work experience then? 

Alberts: 
The four months at TWINERO was a full-time job when I just arrived in Barcelona to begin my studies. The Internship at Viventor was part-time. But I was with them from the beginning and this gave me a really nice background to start the Kuetzal platform. 

Georg: 
If I look at the LinkedIn profile of Romans, your project manager, it shows that he is straight out of school and has no work experience other than with Kuetzal. However, on the Kuetzal about page, it says he has been working as a civil engineer. Can you tell me a bit more about that?

Alberts: 
Maybe he did not update his LinkedIn profile with all of his experience. Romans worked with a company that produces windows. I think he worked as a sub-engineer. Then he worked for a real estate construction company, but I am not sure about his role. We try to keep the team young because if we hired someone who is 50 years old, it would be hard to find a common language. 

Georg: 
What about your COO, Ruslans. He does not have a Linkedin profile. Does he have any prior work experience? 

Alberts: 
Ruslans does not have any experience in P2P, but I trust him and asked him to come work with us. So Romans and I trained him for about three weeks to a month, to teach him how everything works. He has also looked at other platforms and he met some people from the industry. 

Georg: 
I also looked at your board of advisors. Reinis Ignatavics and Janis Bartasevics. These people have more experience, but they are not located in the office on a day to day basis. How much do you consult with these advisors? 

Alberts: 
Reinis used to work for Swedbank and he gave us a piece of advice that we needed at some point. Janis is more involved. He has experience in real estate, so if we have a question we can call him. 

I very much disagree with Kuetzal about the importance of a young team. Hiring someone with more experience in finance, real estate or P2P would most likely give the company a much better foundation for picking good projects and protecting the interest of investors. I told Alberts that I would like to go to a meeting with him together with Janis Bartasevics to get some more insight into how much he helps Kuetzal, but I did not manage to make it happen during the couple of months I stayed there during summer. The board of advisors has now been removed from the Kuetzal about us page, but you can access an old version of the about us page on web.archive.org. This makes me wonder how much Kuetzal actually consulted these two advisors. The reason why I drilled into the experience of the Kuetzal employees is that I had, and still to this day have, doubts that they have the knowledge or resources in place required to pick the proper projects for investors. Alberts told me that they reject 90% of all loan applications, but I just did not see how they have been able to pick the remaining 10% that should be put on the platform. 

Recently, Alberts and the rest of the employees at the Riga office left the company, and the office in Riga has been closed down. It has been communicated that Kuetzal now has a new CEO, Maksims Reutovs, who has some more experience. However, as I understand it, he currently has no written contract with Kuetzal. So for the time being, I am not really sure if anyone is actually employed at Kuetzal. I find this situation quite concerning. Viktoria Gortsak, the registered owner of Kuetzal is now also on the about page. There is a lot of talk on the forums and social media about how involved she really is, and that she may be a front for someone else. This is all just rumors so I will not comment too much on it in this article, but some of the details that people are starting to dig up concerns me.  

Lack of due diligence of projects and borrowers

Georg: 
How is your due diligence process when you consider onboarding a new project? 

Alberts: 
First, we have an initial meeting to get the first experience and learn something about the people behind the project. Can we work with them? Are they educated? Many different things. We then look at their financial statements and reports. We check that they are official and not involved in a scam or breaking the law in any way. Only then we start to discuss the terms and establishing the contract itself. In the case that it is a real estate project we also use a lot of time checking that the mortgage is sufficient for us to be involved in the project. We also check the evaluation of the specific building. This process usually takes a couple of weeks or even a month. Our team is quite busy and we are currently looking for a few extra employees, e.g. an affiliate manager. 

Georg: 
So when you do your due diligence, do you get a second opinion? 

Alberts: 
Sometimes we involve Janis as an advisor. Other times we involve people who we do not mention on the platform. It could be someone with deep knowledge of the logistic market. We have several of those types of projects on the platform. On every project, we try to get an opinion from some representatives from the market. 

It seems like Kuetzal is at least asking for an opinion of someone who knows the market, when onboarding a project. However, Kuetzal recently changed their Terms of Service page and under paragraph 5.6 they now state the following: 

The Portal Operator does not perform any due diligence of the Borrower or the Project.” 

To me, this basically translates into that whatever application for a project that comes in, can be put on the platform without investigating the potential risks involved. I personally do not have the time or the capabilities to do proper due diligence of any of the projects on Kuetzal. So for me to invest with Kuetzal would be a huge risk. I expect the due diligence to be part of the service that a platform delivers to their investors. 

We now start to see several examples of projects that, had due diligence been performed, would most likely not have been made available for investors. One of these is the Aalborg Petroleum project case investigated by Explore P2P. The investigation they did could have been done by any investor without any deep knowledge. The problem is, most investors don’t look any further than the project description on the P2P platforms. The explanation for this usually is “I only invest 100 EUR in the project, so it is not that big of a risk for me.” But what happens when you have 100 of these projects, onboarded without due diligence in your portfolio? Is it a big risk then? 

I expect that proper due diligence or scoring has been done on the platforms I invest with. If a platform does not perform any due diligence, it should be much clearer than a paragraph buried somewhere in the terms of service page. Many investors will completely overlook this vital piece of information.

Concerns about buyback

Georg: 
I see that, for example, all of your real estate projects have buyback. However, if the project defaults and the buyback kicks in after two months, where will the money for the buyback initially come from? I mean, it could potentially take many months or even years to go through the proceedings in court and then sell the assets. 

Alberts: 
It is basically coming from our pockets. We have to involve our own money, of course. So all the buyback we are posting we can guarantee. 

Georg: 
Kuetzal is a company and you say that some money for the buyback could come from your personal account. So the money for the buyback is not actually on the company account? 

Alberts: 
No. If we don’t need them we don’t see a reason to do that. 

Georg: 
So what is stopping Kuetzal from just declaring bankruptcy if you get into a situation where the money in the company cannot cover the buyback? How can investors be sure that your own personal funds will cover? 

Alberts: 
Well, it is a question of trust. So nothing basically is stopping us from doing that, except that I am not that kind of a person who would do something like that. So it is a matter of trust in the company. 

When it comes to buyback I prefer that it can be fully covered either from a margin in the company or some kind of provision fund. Alberts seems like a good lad, but I really don’t count on him putting forward his own personal funds, to cover any buyback at Kuetzal, when he is not the owner of the company. Now that Alberts has left the company, I wonder how Kuetzal now plans to cover the buyback in the case that there are not enough funds in the company. 

Concerns about cybersecurity

Georg: 
How much does Kuetzal focus on cybersecurity? 

Alberts: 
Our outsource partner, who does our IT, runs two projects at the same time. One is about IT maintenance and the other is about IT security. So we are using his service to protect our website. I am not educated in this field and I am not involved in IT cybersecurity, but we are paying extra for this as it is very important for us. 

As I used to work in IT myself, I poked around a bit on the Kuetzal website and quickly found a vulnerability that could enable script kiddies to gain access to some investor accounts using brute force tools, if you had reset your password and did not change the generated password after a reset. It scared me a bit seeing such an obvious security vulnerability on an investment platform. I do realize that if someone got access to an investors account, It would be highly unlikely that they would be able to transfer any funds to their own account. However, it would give them access to some personal information about the investor. I told Alberts about this and sent an email to him and their IT partner, explaining the vulnerability. 

I am happy that when I checked today, I could see that the vulnerability has been patched. I am not sure when the vulnerability was patched, as I lost interest in the platform after the interview. However, I created an account without making any investments, to be able to receive emails about new projects and other communication from the platform. On the 14th of October, Kuetzal investors received an email about an attack on the Kuetzal website. 

Even though Kuetzal reflected the attack, to me it seems like the hackers may have gained some kind of access, or at least that Kuetzal had doubts about if the attackers gained access to some investor accounts or maybe the database. These are all pure speculations, though. However, I have not received a similar email from any of the 23 P2P platforms I am currently invested with, even though I am pretty sure that they have all, at some point, had attempts to attack their website. 

Full audio interview

Final thoughts about Kuetzal

With the Aalborg Petroleum project case, and the recent statement that Kuetzal does not perform ANY due diligence on projects or borrowers makes it all fall apart for me. This is a high risk platform in my own personal opinion and I will not be investing with them. Jørgen, another Danish P2P blogger, who has been investing a large amount with Kuetzal for a while and used to be pleased with the platform, recently decided to make a buyback and withdrawal request and he now plans to exit the Kuetzal platform, if possible, even with a loss. With the recent development, this change of heart is very understandable. He shares a long list of concerns about Kuetzal, including concerns about several other projects on the platform, besides the Aalborg Petroleum project. I really hope that Jørgen and any other investor who decided to make a withdrawal request by sending an email to Kuetzal, manages to get their money back on their bank accounts. But please don’t panic if it takes a little while. Remember that we are in the middle of a holiday at the moment. If you want to read a little more about the current concerns about Kuetzal, Explore P2P also published an article with their concerns recently. 

Share the knowledge, your opinion and get answers to your questions​

Have you already invested with Kuetzal? What do you think of the platform? Am I being too negative towards the platform? What do you see as the pros and cons of the platformAre you thinking about signing up? Are you thinking about leaving? Have you made a withdrawal request within the last few weeks and did you get your funds back on your bank account? Please leave a comment below! If you know someone who may find this interesting, feel free to share this article with them. 

This Post Has 5 Comments

  1. daniel riquelme

    Hi Georg. Great job you are doing, but I would like to ask you why you didn’t post this interview before. I invested money in Kuetzal and after reading this post I would never have done it if I had this info before. Why you decided to keep this info for yourself? Are there other platforms that you have visited and that are rubbish? Would you share that info with the community?
    When you say: “I have been holding back on the bad ones. They are not so fun to write. In the large number of interviews I did, there were some that left me thinking: “I just cannot invest my money at this platform”. I’d REALLY want to know which are this platforms and why you said that and then with this info decide by myself what to do.
    Anyways. Good job.

    Regards

    D

    1. Georg

      Hi Daniel,

      First of all, thank you for your comment and for giving me a chance to respond.

      Looking back, I really wish that I had put the article together with what I had at the time. No matter how unfinished the article seemed to be. I agree with you on that today. But at that time, I was not sure if I missed something. I actually did not even plan to visit them as they were a very new platform. They started raising funds in November 2018. That means that at the time of the interview they only had a track record of 7 months! When things started to go bad for Kuetzal, they only had a track record of one year.

      Anyway, as I got the chance to visit them, I jumped on it. I only prepared for the interview for a few hours. I looked up the employees on Linkedin, looked into one of the projects, but just very quick and on the surface. The rest of the questions were basically the same questions that I asked all the other platforms I visited. The Keutzal team members are very young and inexperienced according to Linkedin. I usually pick platforms that have a 2+ year track record, unless they have something that really makes them stand out in a positive way. So unless the interview would provide me with something special, in particular, in terms of advisors, I was not going to invest anyway. The young team and the short track record were until recently my main concerns.

      Unfortunately, the meeting did not supply me with sufficient information about their advisors. They had to have someone helping them, right? Did I miss something? Did I not ask the right questions? I mean, other bloggers that had visited them several times, and had years of experience visiting platforms, seemed to love Kuetzal. Why were they not more concerned?

      Janis, the architect, seemed like he could be an important resource for the team. He does not speak English, though. So I found a translator who speaks English, Russian, and Latvian. I know Albert speaks Russian and Latvian. I hired the translator the following Thursday where I had a meeting with Alberts and Janis. I wanted to be sure I understood and that the translator was there to see if Alberts were translating correctly. Janis should have a lot of experience, so he could be one of the people helping with the due diligence. Unfortunately, the meeting was canceled and I could not get a hold of Alberts anymore, after I sent him and his IT an email about the IT security issue. I sent several messages and called him as well. No response. So I actually put the article on hold when I left Riga. I had to wait and have more meetings later this year when I return to Riga.

      I was in doubt about Kuetzal, but not sure. The thing that did make me sure was the announcement of the “Kuetzal does not do any due diligence” in the new Terms of Service. That was just recently and that made me absolutely sure, that Kuetzal was not a platform for me or any sensible investor. I finished the article with what I had and published it.

      Unfortunately, at that time, it was already too late as investors had started to cash out on a large scale. Nobody expected it to go so bad, so fast, with Kuetzal. Everybody seemed happy with the platform and they were paying on time. I was planning to spend more time with Kuetzal next year, but that is, of course, off the table now.

      I wanted to be sure that I had my facts right, as unsupported rumors can kill off a perfectly good platform. So I fell like I have an obligation to do my due diligence in a proper way, before sending any opinion out there. On top of that, I had to wait for them to fix the security issue before I could share it. I realize now, that had I put my small piece of the puzzle out there, right after the interview, it may have stopped some investors from investing. For me, Kuetzal became a second priority, as I had many other really good interviews with solid platforms, that I wanted to focus on and invest with.

      What I have learned from this is that I should put my concerns out there faster, even it is is just small things. It could be an important piece of the whole puzzle. So I will be sure to do that in the future!

      Other platforms I am concerned about are Fastinvest, Monethera, and Iban Wallet. Why? Fastinvest has little transparency in terms of loan originators except for one. They also blocked access to their site during the P2P conference in Riga. There are many other concerns but people still invest with them. I still have money invested there, but a lot less than previously and I am constantly on the fence if I should exit completely or not.

      I hardly looked into Monethera, but there are bad rumors about them in the P2P community and they started off with copying content from one of the other platforms. Kuetzal did the same when they started up and I don’t think any serious platform would do this.

      Iban Wallet reached out to me, as they wanted us to promote their platform. I asked them some simple questions back about their products and there was no response even though I asked several persons at different times. That is enough for me to keep away from the platform.

      As I have now visited and investigated most of the platforms in my own portfolio, this year I will have some more time to look into platforms that I am more concerned about and only invested very little in or not at all. I am especially interested in the three platforms above. If you have some concerns about any other platforms, let me know and I will put them on the list for later this year when I go back to the Baltics for many more company visits.

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