Prosper is the latest Silicon Valley company to get dinged by, and settle charges with, the SEC
Another Silicon Valley company is settling with the SEC: the online lending company Prosper, which the SEC had accused of “miscalculating and materially overstating annualized net returns to retail and other investors.” Prosper has agreed to pay $3 million as part of the settlement, in which it has neither admitted nor denied the agency’s allegations.
According to a new release from the SEC: “For almost two years, Prosper told tens of thousands of investors that their returns were higher than they actually were despite warning signs that should have alerted Prosper that it was miscalculating those returns.” The 14-year-old, San Francisco-based company “excluded certain non-performing charged off loans from its calculation of annualized net returns” that it communicated to investors from around July 2015 through May 2017.
The mistake owed to a coding error that excluded the defaulted loans from its computations, the SEC said, causing Prosper to overstate its annualized net returns to more than 30,000 investors on individual account pages on its site and in emails soliciting additional investments from investors.
The SEC added that “many” investors decided to make additional investments based on the overstated annualized net returns and the “Prosper failed to identify and correct the error despite [its] knowledge that it no longer understood how annualized net returns were calculated and despite investor complaints about the calculation.”
The settlement is the second for the SEC in two week’s time. On April 2, the SEC announced that the founder and former chief executive of Jumio has agreed to pay the agency $17.4 million to settle charges that he defrauded investors in the mobile payments and identity verification startup before it went bankrupt.
Source : TechCrunch