The investigation was run by a new management team that has been in place since September, and looked at the activities of the previous management.
"The investigation is ongoing, but has so far pointed to several breaches of internal or external regulation," TrustBuddy said in a statement.
"The company has used lenders' capital in violation of their instructions or without their permission. As a result, there is currently a SKr44 million (US$5.4 million) discrepancy between the amount owed to lenders and the available balance of the client accounts," it said.
Approximately SKr300mn is currently lent out on the platform, but SKr37mn of this is not currently assigned to any lenders. In addition, new lender capital has been assigned to existing bad debt, TrustBuddy said.
"The investigation indicates that these practices were likely in place since the TrustBuddy platform began operation," the statement said. These practices "have been stopped with immediate effect".
As all services and products of the company are suspended, it is not possible to make any withdrawals or deposits, the company said. According to the Financial Times, at least £21m of lenders’ money is therefore unavailable to them.
TrustBuddy's board of directors informed Swedish Financial Services Authority (FSA) of its findings, and the FSA insisted it shut down operations immediately, TrustBuddy said.
A rights issue planned for later this month is also suspended, TrustBuddy said.
The company will report the findings to the Swedish police authority.
Chairman Simon Nathanson, said: "We are of course very disappointed in the situation that has arisen. With the new management team in place, TrustBuddy had both the platform and the capacity to create a company built for growth and industry leadership. In light of the recent events, we now have to redirect our focus to find a solution that is in the best interest for all stakeholders."
Members of the previous management team who are still working for the company have been suspended, and any current or former employees who participate as lenders on the platform have had their accounts suspended, TrustBuddy said.
A Dutch subsidiary, Geldvoorelkaar, operates on a standalone basis and has not been involved in the alleged misconduct, TrustBuddy said.