As mention in the previous post, in 2021 we suddenly get a surge of hits on this blog and some queries. We noted interest in TransferFriend and its founder, Herkki Valiste may have stem from a recent article that came out in an Estonian news site. Unfortunately the site is behind a paywall, but us employees decided to pay for the article and give some additional commentaries about this. Original article can be found here (behind a paywall) :
https://ekspress.delfi.ee/artikkel/94051527/salaparane-idufirma-tombas-investoritele-ja-tipp-poliitikule-koti-pahe
below is a google translation of the article. Translated content in black while former employees give their comments in red :
Kuala Lumpur, the capital of Malaysia, September 2017. Taavi Rõivas , Deputy Speaker of the Riigikogu and IT-friendly former Prime Minister, is on an infamous visit with the Estonian business delegation to Malaysia and Singapore, from which the so-called refrigerator scandal will later break out.
Turns our TransferFriend or rather Herkki Valiste was the organizer of that now famous party in Trader's Hotel. I recall how Herkki was shouting at one of the TransferFriend staff to faster arrange the bus to get the delegates to the hotel.
During the visit, the then top politician Rõivas will inaugurate the new Asian office of the hitherto unknown Estonian start-up company TransferFriend in Kuala Lumpur, unsuspectingly praising the company's "different ideas" and world-changing mission.
TransferFriend is literal rip off of TransferWise, from the name to the color scheme. In fact the technology behind it isn't a TransferFriend proprietary service. TransferFriend uses a 3rd party service provider to do its remittance.
Today's situation: several investors who have financed TransferFriend have lost hundreds of thousands of euros, which they invested in the company founded by the start- up company Herkki Väliste . According to the investors, this was not an ordinary risk project that failed under objective circumstances - in their view, there was a major scam at TransferFriend.
We're a bit on Herkki Valiste's side on this one, sorry to say. Yes indeed Herkki Valiste did not use the money given to him by investors as intended, but that is hardly a scam, more like poor management. We believe investors should've be more diligent after handing their money to Herkki. It's usually good to appoint a trustee, preferably in a top finance position to monitor the way the funds given to Herkki.
CEREMONY: (From left) TransferFriend CEO Siim Säinas, company founder Herkki Väliste and former Prime Minister Taavi Rõivas at the opening of the start-up company's Kuala Lumpur office in September 2017.
The "Estonian company offering money transfers to Asian workers opened an office in Malaysia" published in September 2017 is practically the only news in the Estonian media about the mysterious TransferFriend. Neither sooner nor later have we heard anything about the company, and its founder Väliste is also quite unknown among start-ups.
Ask any ex employees of TransferFriend, Herkki Valiste loves boasting about his connections. "I have good relations with <insert famous people name here>" is like his signature quote.
"In any case, this business did not fly," confirms Indrek Pällo , a former representative of Enterprise Estonia in Singapore. It was he who helped the company to reach potential financiers in Estonia at the time.
We wish Mr Indrek Pallo could've more diligently checked on the business before endorsing it.
According to the office news, it was a company operating in the Asian fintech sector, which offered a unique solution for transferring money to migrant workers without a bank account in a market estimated at approximately $ 580 billion a year. In essence, a service similar to that offered by the Estonian Wise, which went to the London Stock Exchange this month.
As mention earlier, direct rip off from TransferWise. Not unique because TransferFriend was using a 3rd party
Something really did work: in 2018, the TransferFriend app was able to transfer money from a Malaysian ringgit to Indonesian or Nepalese rupees under certain conditions.
This was infact, was CONDUCTED ILLEGALLY. The Malaysia Central Bank and authority for Money Remittance Service, Bank Negara Malaysia, sent a warning letter to TransferFriend that it cease to conduct this service. Yet subsequently Herkki Valiste will request the marketing team to publish article mentioning that TransferFriend service is license or endorsed by Bank Negara Malaysia still.
Four years ago, the TransferFriend app was allegedly loaded on more than 20,000 devices.
Ah any employees of TransferFriend will recall Herkki's obsession with download numbers every week.
LinkedIn can also be considered the company's ambition to create "the world's most trusted fintech brand", which will help customers save up to 85 percent on money transfer fees. At the same time, it is claimed that the company has offices in Malaysia, Singapore, Hong Kong and Estonia.
But all the big plans today seem to be finally written in the chimney. The company's website contains irrelevant Japanese text.
Yeah he doesn't really pay a lot of these services on time. Anyway we archived a few snapshots of transferfriend website while it was still up via wayback machine. Link can be found below :
https://web.archive.org/web/20180501000000*/transferfriend.com
In January this year, the police received a crime report from a donor of TransferFriend. The investor points out that the founder of TransferFriend, Väliste, has committed an investment scam: in 2016–2019, he has persuaded investors to invest money in his venture by providing false information. The investments were made in the form of a loan, which was later to be repaid or for which the investors had to receive a share.
There are at least three victims. One received a loss of almost EUR 570 000 and is also a criminal complainant. The second lost almost 157,000 euros in TransferFriend and the third 53,000 euros.
All investors keep a low profile and hide behind their lawyers. Andres Simson, a sworn advocate, represents the biggest loser . Simson refuses to disclose the name of its client to Ekspress.
As mention earlier, it's good to appoint an independent trustee to monitor the company accounts.
One investor received a loss of almost 570,000 euros and is also a criminal complainant. The second lost almost 157,000 euros in TransferFriend and the third 53,000 euros.
The complainant investor considers that, from the outset, the Outsiders had no desire to repay the money or to give shares to the investors. When the loans matured, investors received only part of the money back at best, or some did not get it at all. The outsider has allegedly refused any additional repayments and ignored the commitments. Despite the investors 'requests, he has not provided correct reporting or explained the circumstances of the use of investors' money for his own purposes.
The money invested in the company by the victims has allegedly been used by the start-up for personal purposes, ie not related to business. After littering the money in this way, Outsiders allegedly hid the loss of money, lied to existing investors and continued to attract new money to the company, also convincing existing investors to pump more money into the company - so that the business could still work properly. External promised investors that only a few licensing obstacles still need to be overcome and the company will start earning revenue.
The licensing obstacles is a huge one. Although TransferFriend managed to secure a temporary license (called the Sandbox) to conduct money service business in Singapore for around 1 year, funds were already drying up. Not to mention the CEO which lead TransferFriend to obtain the sandbox license Mr Siim has already resigned. Leadership of the company is all on Herkki Valiste now, who has barely any cash left to conduct any marketing activities to attract revenue. Herkki Valiste somehow believe with almost zero cash, marketing is able to perform a miracle to attract customers in Singapore to use the platform, saying buzz words like "Guerilla Marketing" or "creative advertising". I recall marketing has a budget of USD 100 per week to conduct its facebook advertising in Singapore, while Herkki continue to enjoy staying in his USD3k a month property nearby.
Then while TransferFriend barely has any cash to conduct the Singapore operations, Herkki Valiste tried to push to get the Malaysia licensing business. This is a futile effort as Malaysia authorities would like to see a company with a track record before granting such license to a company. Not to mention the central bank already knew TransferFriend has illegally conducted money service business back in 2017. Herkki should've concentrated effort in securing the Singapore license and converting into a full license, instead of trying to apply as much license in other countries when there's barely any cash left. We were clueless on why Herkki would be so obsessed getting licensing in so many countries with so little cash, after reading this article we finally realize it was to secure more funding from investors.
Most of the subsequent article talk about Estonian law and whether Herkki did conduct a criminal act. We won't comment much on these and further below later.
As there was a skewed view of the company's operations, the money taps reopened and investors added capital to the company. Much of it allegedly went to finance the external lifestyle. It is alleged that, for example, he paid himself a salary of almost 3000 euros, paid the company leasing payments for a vehicle located in Estonia and the rental and utility costs of apartments located in both Estonia and Malaysia.
Herkki Valiste controls all the bank account (despite not being a Director of the company at that time) and not even the Finance team is allowed to view the bank statements. We don't know how much money was given by investors and where it was being spent. We just know that it wasn't enough to pay staff salaries as staff are always paid salary very late, sometime reaching 1 month overdue. Anyway we do know that he rents a approx RM10,000/month luxury apartment near KLCC. Not something a founder of startup strap in cash should be doing. Here the apartment in case you're interested :
https://www.propertyguru.com.my/property-for-rent/at-dedaun-2116
Accounting was ligadi-logadi in the company. Investors managed with great difficulty to obtain partial account statements. They read that, for example, in August 2018, Väliste sent 125,000 euros from one of its Estonian private companies to Hong Kong investors. A large part of it was spent on an apartment, a car, salary and some other line of expenses, which was called "own expenses" in the account statements.
Ultimately TransferFriend financial structure doesn't make sense. Herkki Valiste claims this complex structure is for tax savings purposes but doesn't divulge in detail.
DON'T RECOGNIZE: Transferfriend's homepage today.
DON'T RECOGNIZE: Transferfriend's homepage today.SCREENSHOT
There were several foreign private companies in Estonia, which, as promised to investors, all had to be consolidated under one company registered in Hong Kong.
Police considered a criminal complaint, but to the disappointment of investors, failed to initiate criminal proceedings.
The investigator found that the allegations that it had been made to external investors were vague and unsubstantiated. That is why we cannot talk about a scam. This type of ordinary contractual dispute was advised by the parties to be settled in court.
The outraged investor appealed against the decision not to initiate a criminal case to the Northern District Prosecutor's Office, but the assistant prosecutor there, Melinda Ülend, did not see a clear crime in the case either.
This was followed by a new complaint from the investor to the Public Prosecutor's Office, but the result is still the same: the Public Prosecutor's Office found in April this year that there are simply no grounds for initiating criminal proceedings.
The position was also challenged once more, but the Tallinn Circuit Court finally dismissed the appeal.
The Public Prosecutor's Office pointed out that the Foreigners had not fulfilled all their obligations. For example, he has returned 165,000 euros to one investor and 7,000 euros to another. Consequently, it is not plausible that his aim from the outset was to pull the skin over the ears of investors. Although the loan agreements are long overdue and the money has not been repaid, this does not mean that the borrower planned not to repay the loans from the beginning.
The topic seems to be off the agenda today, but the mystery around TransferFriend has remained. Investors refuse further comments. Taavi Rõivas, Indrek Pällo and other members of the Estonian business delegation who visited Asia in 2017 do not want to add anything.
Herkki Väliste remained inaccessible to Ekspress - his phone was switched off and the mailbox threw back the letters.
Don't worry, it was hard for employees to reach him as well. Whenever he owes some vendor money he will 'ghost' them and forbid staff to communicate with them.
However, looking at it in a positive light, all parties are richer by a good lesson.
I'm sure we all are. Ultimately as ex employees we just lost a few months of waste time working with Herkki Valiste dodgy TransferFriend. None of our loss can compare with what the investors has.
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