The Chief Executive Officer of Lending Club -a peer to peer lending/borrowing platform- resigned after a company’s press release uncovered a scheme allegedly perpetrated by the company’s chairman and CEO Renaud Laplanche, three senior managers may be also involved.
An official press release by Lending Club announced the resignation of the now former company’s CEO Renaud Laplanche, Scott Sanborn will continue his role of president of the company, and will become the acting CEO.
His resignation (Laplanche) followed an internal review of sales of $22 million in near-prime loans to a single investor, in contravention of the investor’s express instructions as to a non-credit and non-pricing element, in March and April 2016.
The company said that the $22 million in loan sales was minor and then proceeded to unveil the First Quarter 2016 financial Highlights, the stats revealed a 68% increase in Originations from $1,635 million in 2015 to $2750 million in 2016. There was also a significant increase in operating revenue which grew from $81 million in 2015 to $151.3 million in 2016.
The shares of the company plummeted to a negative 35% on Monday. The press release didn’t disclose the level of involvement of Laplanche in the fraudulent $22 million loan sales, according to the official sources, the sale of loans was suspiciously made to customers with low credit scores. The single accredited institutional investor identity was not revealed.
The loans in question failed to conform to the investor’s express instructions as to a non-credit and non-pricing element. Certain personnel apparently were aware that the sale did not meet the investor’s criteria.
Lending Club is a 9-years-old company that was founded by Renaud Laplanche, the goal was to build a peer-to-peer lending and borrowing platform, where the parties will meet without the hassle or complications of traditional loan agreements, powered by information technology, Lending Club was able to build a sound platform that reached a $33 per share value in the stocks, the market capitalization dropped from the $9 billion mark it reached shortly after the Initial Public Offering to the $2.71 billion today.
The company’s mission -according to their website- is to:
Transform the banking system to make credit more affordable and investing more rewarding. The Company’s technology platform enables it to deliver innovative solutions to borrowers and investors. We operate at a lower cost than traditional bank lending programs, so we’re able to pass the savings on to borrowers in the form of lower rates and to investors in the form of solid returns.
Further investigation is being done at the moment, this announcement comes as a bucket of cold water for FinTech investors, in recent months the industry has suffered from growth slows and increasing regulations.
Image via LendingClub
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