Lending Club under investigation by US Department of Justice, receives subpoena
(Reuters) – The US Department of Justice has launched an investigation into Lending Club Corp LC.N, the online lender whose chief executive, Renaud Laplanche, was kicked out last week after an internal investigation found the company forged documents during the sale of a set of loans.
The company also said Monday in a quarterly filing with the Securities and Exchange Commission that a number of its large investors had halted their investments in Lending Club loans following Laplanche’s resignation, which could have a negative impact. significant effect on the performance of the company in the future.
Lending Club said it did not know what impact the slowdown in investments would have in the future or if investors would return.
The San Francisco-based company is the largest of the so-called lenders in the market, which sell their consumer and small business loans to investors.
Lending Club said in its file that it received a subpoena to appear before a federal grand jury on May 9, the same day it announced the resignation of Laplanche, founder of the company and a well-known figure in the online lending industry.
The events raised broad questions about the transparency and sustainability of the burgeoning sector.
Lending Club said in the filing that it “intends to cooperate with the DOJ and the SEC.” The company declined to comment further.
The Justice Department did not immediately respond to a request for comment.
Lending Club, a market pioneer in lending, revealed last week that it knowingly sold an investor over $ 22 million in loans that the investor did not want. In addition, a $ 3 million application date for these loans has been changed to appear to meet investor demands, the company said.
“Some staff apparently knew the sales did not meet investor criteria,” the company wrote in its file. The company subsequently repurchased the loans.
Monday’s filing showed Lending Club bought back an additional $ 3.8 million in loans during the first quarter that did not meet investor criteria, but it provided no further details.
The file also revealed that Laplanche and CFO Carrie Dolan had used some of their stocks to secure personal loans, which the board discovered during an internal review. In January 2016, the fall in the company’s share price forced Laplanche and Dolan to refinance.
Lending Club said the company was not involved in these personal loans and did not have to give approval.
On Monday, Acting Managing Director Scott Sanborn sent a letter to investors, seeking to assure them of greater transparency in the company.
In March, he said, after the Lending Club detected changes in the application dates of 361 loans, it hired an outside company to audit around 673,000 loans sold to investors over the past two years. .
As many as 99.99% of audited loans showed no signs of tampering, Sanborn said, adding that the company is also tightening up loan monitoring, doing more to detect forgery and retrain employees.
Lending Club shares are down more than 44% since before Laplanche’s resignation and 64% for the year, hitting a low of $ 3.24 on Monday. The company raised $ 1 billion when it went public in December 2014, when it sold shares for $ 15 apiece.
“Lending Club had an impeccable brand,” said Peter Renton, founder of LendIt, which hosts events for the online lending industry. “People trusted them and they lost that trust. “
Reporting by Heather Somerville in San Francisco and Rishika Sadam in Bengaluru; Additional reporting by Michael Erman in New York; Editing by Jonathan Weber and Clarence Fernandez