STREAMING NOW: Watch Now

SEC charges LendingClub unit with mishandling investors' money

Two former executives of LendingClub mishandled investors' money and fudged the returns of funds that they o...

Posted: Sep 30, 2018 10:11 AM
Updated: Sep 30, 2018 10:11 AM

Two former executives of LendingClub mishandled investors' money and fudged the returns of funds that they oversaw, the SEC charged Friday.

Ex-CEO Renaud Laplanche, former finance chief Carrie Dolan and a LendingClub subsidiary will pay a combined $4.2 million to settle the charges. The settlement also bars Laplanche from the securities industry for at least three years.

Regulators had already accused the company of deceiving customers about fees and taking money from their accounts without authorization. LendingClub connects borrowers directly to investors without banks serving as a middleman.

LendingClub's advisory arm and Laplanche directed one of the private funds LendingClub worked with to purchase interests in loans that looked like they could go unfunded, according to the SEC.

This served "to benefit LendingClub, not the fund," the SEC said in a statement. Laplanche, Dolan and the advisory unit also inflated returns for funds they managed, it added.

"Investors depend on fund advisers to give them the straight scoop on performance so they can make informed investment decisions," Jina Choi, director of the SEC's San Francisco office, said in a statement. "Advisers who adjust their valuation processes to boost results are in breach of their duties to investors."

Laplanche, Dolan and the subsidiary agreed to the settlement without admitting to or denying the SEC's findings.

In a statement, Laplanche said he was "pleased to have worked out a settlement with the SEC to put to rest any issues related to compliance lapses that might have occurred." Dolan's current employer did not immediately respond to a request for comment.

LendingClub has been in legal limbo since 2016, when the company's board began an investigation into Laplanche that culminated in his resignation as CEO and chairman. Multiple federal investigations into his behavior followed.

The SEC said it did not recommend charges against LendingClub as a whole, as the company "promptly self-reported its executives' misconduct" after the board investigation and provided "extraordinary cooperation" during the investigation.

In addition to the SEC settlement, LendingClub agreed to pay $2 million to resolve a civil case brought by the Department of Justice about the allegedly fraudulent loans. LendingClub admitted no guilt in the settlement.

The company is also continuing to work toward a resolution with the Federal Trade Commission, the person said.

In April, the FTC charged LendingClub with misleading customers, who were said to have been falsely told that loans came with "no hidden fees." In reality, the company deducted hundreds or even thousands of dollars in secret fees, the regulator said.

At the time, Lending Club called the FTC's allegations "legally and factually unwarranted."

LendingClub chairman Hans Morris said in a statement Friday that the company is "pleased to have resolution and closure" on the SEC front.

"The findings of the SEC further support the Board's decision to take swift and decisive action" against Laplanche, Morris said. "We have full confidence in our new management team and we are a better company today."

The fintech company has struggled since it went public in 2014. Since its IPO, LendingClub shares have fallen more than 70%. On Friday, its stock rose 1%.

Article Comments

Mason City
Broken Clouds
75° wxIcon
Hi: 76° Lo: 56°
Feels Like: 75°
Albert Lea
Scattered Clouds
73° wxIcon
Hi: 74° Lo: 57°
Feels Like: 73°
Austin
Broken Clouds
75° wxIcon
Hi: 77° Lo: 57°
Feels Like: 75°
Charles City
Clear
77° wxIcon
Hi: 76° Lo: 56°
Feels Like: 78°
Rochester
Broken Clouds
72° wxIcon
Hi: 74° Lo: 55°
Feels Like: 72°
Tracking Our Next Chance for Severe Weather
KIMT Radar
KIMT Eye in the sky

Latest Video

${article.thumbnail.title}

Storm Team 3: Severe storms possible later this week

Image

Making youth sports affordable

Image

local sports program helps players become community leaders

Image

"What's On Wednesdays" in St. Charles

Image

Tracking a Sunny Start to Wednesday

Image

Re election kickoff watch party

Image

Rallying for Sudan

Image

Extra speed enforcement

Image

Local sports highlights from Tuesday

Image

Renewing the Mental Health Coordinator

Community Events