Danish investment firm MyC4, that crowd-funds from investors in European countries and lend to small businesses and startups in Africa, has closed its operations in Kenya after it ran into serious legal issues with its local partners that could make it lose up to $1 million of investors fund.

The crowdfunding firm says it will not be accepting any more investments nor will it be lending to businesses in Kenya until it fully recovers about $980,000 it extended to Kenya Entrepreneurship Empowerment Foundation (KEEF) and $84,000 it gave Milango Financial Services.

“These defaults are so serious for our business that we have decided to take timeout for uploads of new loans and have disabled the possibility for investors to upload more money to the myc4.com platform,” the investment firm said  in its 2014 annual report released this month.

‘‘Our focus in 2015 will be on solving disputes and collecting as much as possible out of the outstanding loan portfolio to secure the best interest of investors on myc4.com.”

The Copenhagen-based company that is seeking to recover the money through an arbitration process, said its Kenyan partners stopped lending and collecting loans more than a year ago after an internal fraud was discovered.

MyC4 said that it has since been unable to recover the cash and could not payback investors or justify raising additional funds.

This means that investors in Denmark and other European nations cannot inject anymore money in the company, although the company will continue pursuing all its loans in Kenya.

KEEF has also filed a lawsuit against MyC4 claiming that it did not owe any money for the Danish investment firm, fyens.dk reported.

“MyC4 has been taken hostage by KEEF,” Mads Kjær, MyC4’s chief executive and co-founder said in a newsletter to its investors.

“Everyone knows that (the court case) can drag on for a long time, so I cannot say anything about when we will be ready again. There is clearly a risk that this could be life-threatening for MyC4,” he added.