Other sites are blogging about this topic as well:
http://www.uslaw.com/library/Academic/Prosper_Marketplace_Settles_Charges_Offered_Unregistered_Securities.php?item=306295
http://lawprofessors.typepad.com/securities/2008/11/prosper-marketp.html
From the last link:
Prosper consented to the issuance of the Order without admitting or denying any of the findings in the Order.
I know there are folks who are preparing a class-action against Prosper based on the SEC findings. However, does this line indicate the SEC is not going to pursue any further action against Prosper? Can Prosper still attempt to now become "legal" by registering and reopening at some point down the road?
Based on the information Staneslav posted earlier in this thread, it appears to me Prosper considers this whole situation just a part of doing business and getting registered. I guess I'm a bit confused by all the noise, trying to figure out where the signal is here.
It may well be that the SEC is not interested in remedying Prosper's past violation of the securities laws, and was only concerned about the future. Prosper can surely continue its efforts to "become legal," which may well be successful -- although Prosper 2.0 is likely to look a lot different than the original (probably similar to LC). However, none of that changes the fact that the SEC has found that Prosper has illegally issued $178M in unregistered securities. IMHO, a class action lawsuit is virtually 100% certain, and will cost Prosper dearly. Indeed, I believe that Prosper will almost certainly have to declare BK as a result, as it couldn't possibly afford to repurchase the loans.
In theory, since repurchasing the loans would make Prosper their owner, Prosper could seek a loan to finance the repurchases, using the loans as collateral. But given that there are $21.7 million in net-charge-offs alone (which obviously have virtually zero value), plus another $3.9 million in 2-3 month lates (which have very little value) and $2.5 million in 1 month lates (to say nothing of all the lates that will occur in the future), I really can't see how Prosper can stay out of BK.
