LendingClub’s fall from rock star status

Not long ago, LendingClub was the brightest star in the rapidly-growing world of online lending. With shares having dropped two thirds in two months, the company now has investors nervous. LendingClub’s fall began following the announcement of a government investigation, an investigation LendingClub has announced it is “fully-cooperating” with. The investigation is looking into three key issues:

then-CEO Renaud Laplanche failing to disclose a personal investment in Cirrix Capital, a firm that invested in LendingClub loans and vice versa;
the improper sale of USD 22.3 million worth of loans, despite them not meeting certain criteria;
loan manipulation in the form of LendingClub employees changing application dates on USD 3 million in loans as part of an attempt to meet investor requirements.

To help reassure investors, LendingClub launched an internal investigation into the matters, hired a new CEO and let go of a number of senior management. The company has also claimed that no material adjustments are necessary to be made to its financial statements as a result of the uncovered instances. Experts believe that it will take a considerable amount of time for the fallout to be overcome. Moreover, they state that it is possible that confidence in online lenders in general could be hurt by LendingClub’s improprieties.

Source: money.cnn.com