Lending Club plans layoffs, discloses loans to former CEO and family members

As someone who built the most popular iOS &#x2F; Android app for Lending Club investors [0], I can tell you that since the CEO resigned<p>- New users have fallen by 50% per month, although of course users to my app are a fraction of total new users, but you can extrapolate<p>- Total net, users are withdrawing about as much money as users are putting in<p>- The amount of loans purchased has dropped significantly<p>So without a doubt, retail investors know what&#x27;s going on and fear for the safety of their investments.<p>[0] <a href="https:&#x2F;&#x2F;itunes.apple.com&#x2F;us&#x2F;app&#x2F;lendingclub-order&#x2F;id1046114132?mt=8" rel="nofollow">https:&#x2F;&#x2F;itunes.apple.com&#x2F;us&#x2F;app&#x2F;lendingclub-order&#x2F;id10461141...</a>

<i>The latest disclosures Tuesday, uncovered by a company probe, found that in the last few weeks of December 2009, Laplanche and three relatives took out 32 loans for a total of $722,800. All but three of those loans were repaid in full over the next two months, implying they were taken out to artificially goose Lending Club’s loan origination numbers.</i><p>If true, would that be considered fraud?

Wow, so the crown of the &quot;fintech&quot; movement is just as bad as the banks, and the two biggest Silicon Valley successes of the last decade, Uber and AirBnB, are really just cases of massively successful regulatory arbitrage. Nice innovation!

&gt;&quot;the idea being that safer, higher-yielding loans would be more attractive to investors&quot;<p>Who would have thought that the basic laws of lending apply to fintech startups?

I highlighted several months that their behavior strongly signaled cooked books but I didn&#x27;t think it would reveal this fast! <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=11660112" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=11660112</a>

Other than investing in their stock, there&#x27;s an argument to be made that it might actually be a relatively safe time to invest in their loans.

Stock&#x27;s up 7% as I write this. I&#x27;m assuming nothing has been revealed that isn&#x27;t already at least suspected, and layoffs are generally good for a stock&#x27;s price. I&#x27;ve already made money on one dip-and-bounce, but currently in at 4.88, so here&#x27;s hoping it will claw it&#x27;s way back a little bit. I&#x27;m in no way qualified to declare a bottom, but I&#x27;m guessing all of the bad news is out of the way. This in no way constitutes investment advice; in fact, I&#x27;d steer clear of LC if I were you. But I&#x27;m not you, I&#x27;m me, and sometimes I invest poorly.

In just world this would result in a prison sentence, banishment from stock exchanges, and revocation of their corporate charter. The fact that there is no capital punishment for companies, especially public ones, provides a moral hazard.

I don&#x27;t think you need to do any of this shady stuff to be a small loan marketplace for unaccredited participants. But the shady stuff kills your chances to feed the CLO pipeline and selling (large batches of) small loans to accredited buyers.<p>So just... why take _these_ risks? It doesn&#x27;t have a realistic chance of helping any viable strategy that I can think of.

It&#x27;s ludicrous that someone would risk their reputation and their company&#x27;s future for a mere 32 more loans on the company growth report. I can&#x27;t imagine how these loans made a significant difference to these reports. These revelations could be just a scapegoat for more serious fraud.