Its not my business and nothing i have to do with but i don't get the idea about any red trust based on selling the collateral you providing for loan request.
From what i read so far, by requesting loan you should provide 120% collateral right?
So basically you paying 20% above of what you get to not make the person who give you loan in loss right?
In that case physically you can't even bring any loss to the person who give loan right? He always leave with 20% profit or even less if you pay your loan because he take less % right?
Consider person is looking for loan he's looking also for quick cash to pay something.
So trying to sell the collateral before anyone give you loan will bring the person who asking for loan less loss.
The only "bad" thing here is that selling your collateral providing valid proof that you are not looking to repay your loan and just let the person who giving the loan with the 20% profit.
So the only wrong thing i see here is that the person who asking for loan is badly looking for cash and either looking for loan or sell his collateral.
What's the idea of the red trust if the person who give the loan will end up with 20% profit from the collateral  in the end?
I know its not something good to ask for loan which you have no intentions to pay back because you also looking to sell your collateral but in the end the person who give loan leave with 120% collateral  which is 20% profit ??
Correct me if i am wrong please because its my first time talking about loans and stuff...
I never needed loan to understand the full process but from simple view of person who never needed or ask for loan in the end i always see profit for the person who give the loan.
I would like to understand why that's something which should be punished with red trust.

*I'm not here to defend or protect someone but clear for myself why people get red trust for that.