On September 30, 2018 LendingClub officially closed the door on a two-year chapter in its corporate history that its current board and founding team would probably like to forget. Both the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have officially ended a two-year investigation of LendingClub, its subsidiary LC Advisors (LCA), its founder and former CEO Renaud Laplanche and its former CFO Carrie Dolan.
The SEC Finding
The SEC charged LCA, LendingClub and Laplanche with fraud connected to improperly using LCA assets to benefit LendingClub Corporation, LCA’s parent company for which Laplanche was both founder and CEO. LCA and Laplanche, along with former CFO Dolan, were also charged with improperly adjusting fund returns.
“Investment advisers have an obligation to put their clients’ interests ahead of their own,” said Daniel Michael, chief of the SEC’s Complex Financial Instruments Unit, about the decision. “By using funds managed by LCA to benefit its parent company, LCA and Laplanche failed to do so.”
The SEC also noted that it will not recommend charges against LendingClub Corporation, because the firm’s board “promptly self-reported its executives’ misconduct following a review initiated by its board of directors.” The SEC also noted that LendingClub has been highly cooperative in the investigation. LendingClub Chairman Hans Morris expressed satisfaction at the resolution of this issue with the SEC.
Last week’s announcements capped off two years of investigation into the P2P lending firm, and its board has expressed some relief that it seems to be time to turn the page on the events of 2016.
“Following an internal review in 2016, LendingClub’s board of directors accepted the resignation of Renaud Laplanche as chairman and CEO of the company,” the board noted. “The findings of the SEC further support the board’s decision to take swift and decisive action. We have full confidence in our new management team and we are a better company today.”
A better company, perhaps – but recovery has been a slow process for LendingClub, and not always smooth. Investors have returned to the platform in larger numbers, but loan volume and revenue have seen sluggish growth until very recently. Earlier this year, LendingClub saw its stock price hit record lows when news broke that the firm was being sued by the FTC for reportedly charging consumers with hidden fees and, in some cases, double-withdrawing payments from consumer accounts.
Those effects, however, were short-lived. LendingClub’s stock has since recovered, bolstered by Q2 earnings results that demonstrated record-breaking revenue and origination counts.
The build-back from the revelations of 2016 was a bit more of a lengthy process.
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