Stockholm-based consumer p2p lender Trustbuddy has filed for bankruptcy following allegations of misconduct within the company.

The lender said that all assets had been frozen, believed to be in the region of £23m (€31.97m), and in a statement the board of directors said the company was insolvent and could not resume operation.

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This is the first major case of the peer to peer model being disrupted by internal misconduct, and the first failure that this alternative lending model has suffered.

The statement continued: "To ensure fair treatment of all stakeholders, the board of directors, with great disappointment, has decided to file for bankruptcy. The District Court in Stockholm has appointed Lars-Henrik Andersson of Lindahl law firm to handle the process going forward.

"The services of the company will continue to be closed, and the trading in the share will not be resumed.

"An investigation initiated by the new management of TrustBuddy AB has indicated serious misconduct within the company. The board of directors has informed Nasdaq OMX and the Swedish FSA about the situation, and the [Swedish] FSA has demanded that TrustBuddy is to stop offering its services with immediate effect."

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It is believed that the SME and commercial lending arms of the business, Geldvoorelkaar and Crowdfunding Society, are not affected.

Simon Nathanson, chairman of the board of TrustBuddy, said: "As a result of the misconduct, our ongoing discussions with stakeholders, lack of liquidity and inability to operate a regulated operation, TrustBuddy cannot move forward with the business. Today’s decisive action will give all stakeholders the opportunity to receive fair treatment in a structured process. The board of directors and management will continue to support the process going forward in any way we can.

Lars-Henrik Andersson, Lindahl law firm, said: "My immediate focus will be to fully understand the critical questions of the business in order to find the best way to safeguard the interests of the creditors and other stakeholders. One action is to immediately take control over all assets of the company. I am looking forward to an efficient cooperation with the current board and management of TrustBuddy."