
Lending Club plans layoffs, discloses loans to former CEO and family members - latimer
http://www.latimes.com/business/la-fi-lending-club-layoffs-20160628-snap-story.html
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seibelj
As someone who built the most popular iOS / Android app for Lending Club
investors [0], I can tell you that since the CEO resigned

\- 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

\- Total net, users are withdrawing about as much money as users are putting
in

\- The amount of loans purchased has dropped significantly

So without a doubt, retail investors know what's going on and fear for the
safety of their investments.

[0] [https://itunes.apple.com/us/app/lendingclub-
order/id10461141...](https://itunes.apple.com/us/app/lendingclub-
order/id1046114132?mt=8)

~~~
maxerickson
Do you think your users know you are doing analytics on their transactions?

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a_t48
Can you name a major successful mobile application that you think _doesn't_
use analytics?

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maxerickson
I dunno, wouldn't the better question be if I am at all comfortable using a
third party app for financial transactions? Because I'm not. But I'm not super
concerned about me, I'm curious how the thinking goes when someone decides to
collect information about the loans that other people are taking out.

Maybe they are pretty sure that users understand it, the app could have a
strong disclosure for all I know.

~~~
seibelj
There is a rich ecosystem of LC apps and services because of LC's open API.
The only thing the API's allow you to do is invest in loans and transfer money
in and out of your account. I would be quite shocked if any service (such as
lending robot) is able to operate without recording any transactions
occurring. I hope users wouldn't be offended by the (very general) information
revealed above, but I suppose some could.

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jessaustin
Presumably LC itself is recording the transactions? It's obvious that apps
would _want_ to do so as well, but that certainly isn't a necessity. An app
could remember a transaction long enough to ensure that it had posted, and
then forget about it forever.

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ilamont
_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._

If true, would that be considered fraud?

~~~
jacquesm
Nah, that's 'growth hacking' /s.

Really, yes obviously that's fraud but apparently it's perfectly normal _as
long as you don 't get caught_.

Artificially inflating the numbers whilst shopping for investments is
definitely not acceptable. Pumping money around is an old trick to inflate the
visible size of a company, some of these schemes are surprisingly hard to
detect (the one here definitely isn't).

I'm somewhat surprised that there was no oversight in place that would have
stopped this, that's serious money.

~~~
ellius
Yep. Self-dealing is always an enormous red flag for fraud and other
shadiness, in financial businesses especially.

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rando18423
Wow, so the crown of the "fintech" 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!

~~~
acchow
People have dreamt about on-demand car hailing for a long time, but it's
always been a pipe dream - building the two-sided network is such too hard and
too expensive, and a small network is just not worth using as a consumer. How
is this not innovation?

~~~
amalcon
Most of the innovation there was in the cell phone[1]. You've been able to
order a car by phone in major metros for longer than those have been around.
In fact, Uber started off as an app for using those very services.

Props to Uber for execution, but all the pieces were there.

[1]-edit: some in the smartphone, but most in the old "makes calls" cell
phones

~~~
phil21
The older I get the more I realize execution is simply all that matters.

A zillion people had the same basic idea for Uber. They made it a reality, and
made it Not Suck(tm).

The user experience prior to Uber for ordering a car via phone was absolutely
horrific.

~~~
discardorama
I've heard it said many times: ideas are a dime-a-dozen, execution is
everything.

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jsemrau
>"the idea being that safer, higher-yielding loans would be more attractive to
investors"

Who would have thought that the basic laws of lending apply to fintech
startups?

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tsunamifury
I highlighted several months that their behavior strongly signaled cooked
books but I didn't think it would reveal this fast!
[https://news.ycombinator.com/item?id=11660112](https://news.ycombinator.com/item?id=11660112)

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

~~~
pmorici
Nothing they have disclosed has caused me to stop investing in their loans. In
fact you can get some nice high grade loans on their secondary market from
people trying to unload their portfolio at a 3-5% discount to face value.

As long as they don't have any debt on the books you are pretty safe. If they
did have debt there might be some question about order of payment to
creditors.

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

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deelowe
The entire market is bouncing back from brexit.

~~~
pbarnes_1
Except Google, which is down 1%... :)

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rhizome
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.

~~~
jacquesm
> capital punishment for companies

That's the second time today I see this, is this some kind of meme?

~~~
philovivero
Yes, but it's been around for years.

If corporations are persons, and they can commit felonies, why not give them
punishments that are analogous to what you'd give a person who committed a
felony?

~~~
dragonwriter
> If corporations are persons, and they can commit felonies, why not give them
> punishments that are analogous to what you'd give a person who committed a
> felony?

Because corporate personhood is a legal fiction, and a corporate death penalty
doesn't really hurt the people who a corporation stands in for very much, and
hurts lots of other people a lot.

~~~
rhizome
_a corporate death penalty doesn 't really hurt the people who a corporation
stands in for very much_

I know, that's why I included prison.

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mmsmatt
I don'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.

So just... why take _these_ risks? It doesn't have a realistic chance of
helping any viable strategy that I can think of.

~~~
pm90
You answered your question. It is a risk... a risk that not many are prepared
to take. LC seems like it serves those who are willing to take that risk in
hopes of getting better returns.

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paulvs
It's ludicrous that someone would risk their reputation and their company's
future for a mere 32 more loans on the company growth report. I can't imagine
how these loans made a significant difference to these reports. These
revelations could be just a scapegoat for more serious fraud.

~~~
discardorama
Look at the date: they were made in 2009, when the company was barely a year
old. At that time, an additional 730K in loans could have been a needle mover.

