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[AmexFan]

To the moon!

Am I the only one to think of space when glancing at the title of this thread?

[fitznd]

Hm...I haven't checked on anything related to Prosper in a while.  What does this all mean?  Are there any summaries of what is currently happening?  Pages and pages of threads on here.  I have roughly $14,000 in loans still with Prosper, and I don't want them sold or anything as they are all current.

[Xenon481]

To the moon!

Am I the only one to think of space when glancing at the title of this thread?

Every single time.

[CleanRivers]

To the moon!

Am I the only one to think of space when glancing at the title of this thread?

Every single time.

+1

[Mark12547]

To the moon!

Am I the only one to think of space when glancing at the title of this thread?

Every single time.

+1

+1, like maybe one of their satellites is imaging Prosper headquarters. 

[Urbi_et_Orbi]

To the moon!

Am I the only one to think of space when glancing at the title of this thread?

Every single time.

+1

+1, like maybe one of their satellites is imaging Prosper headquarters. 

Yes, I understand NASA likes to study black holes...

[GLeaderAccountantsChoice]

Prosper's civil liability for failure to comply with the 1933 Act's registration requirement can take the form of consideration paid for the security, plus interest, less the amount of any income received thereon, or damages in the event a "lender" no longer owns the security.  In most instances, an action must be brought within one year of a discovery of an untruth or omission in the registration statement or one year after the discovery should have been made by the exercise of due diligence.  Actions based on violation of the Act's registration requirements must be brought within one year of the violation.

Prosper was continuing to make public statements that they were not required to register, even after LC's return to business (i.e., within the last month or two).  Thus, I doubt they are going to be able to argue that lenders should have known more than a year ago that Prosper really was required to register, notwithstanding prosper's assurances to the contrary.

My non-lawyer interpretation is that Prosper's case falls under the definition of the later bolded sentence above, aka failure to file.  The first bolded sentence is referring to when a registration statement is filed that contains misleading or fraudulent information.  Perhaps I'm misinterpreting that.  I don't have the actual language in front of me.

From just the snippets you provided, it's hard to tell.  But in any event, Prosper would probably be estopped from raising the statute of limitations, due to its affirmative representations that registration was not required.  You don't get to trick people into not suing until the statute of limitations has run, and then say "gotcha."

I wanted to follow up on this a tad now that I have some free time.  Here is a link/quote regarding the statute of limitations (bolding mine):

http://www.law.uc.edu/CCL/33Act/sec13.html

No action shall be maintained to enforce any liability created under section 11 or section 12(a)(2) unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 12(a)(1), unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 11 or section 12(a)(1) more than three years after the security was bona fide offered to the public, or under section 12(a)(2) more than three years after the sale.



Here is a link/quote of section 12(a)(1):

http://www.law.uc.edu/CCL/33Act/sec12.html

a. In general any person who-

1. offers or sells a security in violation of section 5......

shall be liable, subject to subsection (b), to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.



Lastly, a link/quote for section 5, from above, which is in regards to failure to file:

http://www.law.uc.edu/CCL/33Act/sec5.html

Sale or delivery after sale of unregistered securities
Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise; or to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale.

It shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed as to such security

[bamalucky]

Prosper told us the product didn't fall under those guidelines.

[GLeaderAccountantsChoice]

Prosper told us the product didn't fall under those guidelines.

I'm sure that is the basic premise behind most registration violations...

Some case law might be worth examining, but that's getting a little further from my realm of expertise.

[beerbud1]

Prosper told us the product didn't fall under those guidelines.

I'm sure that is the basic premise behind most registration violations...

Some case law might be worth examining, but that's getting a little further from my realm of expertise.

That's exactly how the Class Action lawsuit will be determinded...."CASE LAW"

[ira01]

I wanted to follow up on this a tad now that I have some free time.  Here is a link/quote regarding the statute of limitations (bolding mine):

http://www.law.uc.edu/CCL/33Act/sec13.html

No action shall be maintained to enforce any liability created under section 11 or section 12(a)(2) unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 12(a)(1), unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 11 or section 12(a)(1) more than three years after the security was bona fide offered to the public, or under section 12(a)(2) more than three years after the sale.

This is interesting, because it appears internally inconsistent.  While the language you bolded certainly seems to say that the statute of limitations under section 12(a)(1) is one year from the violation (without an extension for delayed discovery), the portion I put in red above suggests that is NOT the case, since it applies a maximum limitations period of THREE years under section 12(a)(1).  Perhaps this is harmonized by applying the three year limitations period for OFFERS to sell, while the one year period applies after a sale is actually made.  I don't know.

In any event, I still think that Prosper would likely be estopped from asserting the statute of limitations given its many affirmative representations that registration was not required.  As I noted above, you generally do NOT get to deceive someone into letting the statute of limitations lapse.

[GLeaderAccountantsChoice]

Per Prosper's new S-1:

http://www.sec.gov/Archives/edgar/data/1416265/000110465908074769/a08-29602_1s1a.htm#RisksRelatedToProsperOurPlatformA_051317

We face a contingent liability for potential securities law violations in respect of loans sold to our lender members from inception until October 16, 2008.  This contingent liability may impair our ability to operate our platform and service the borrower loans that correspond to your Notes.
 
Loans sold to lender members through our platform from our inception until October 16, 2008 may be viewed as involving an offering of securities that was not registered or qualified under federal or state securities laws.  To date, the following litigation has resulted from our prior operations.

 

·                  In November of 2008, the SEC instituted cease and desist proceedings, pursuant to Section 8A of the Securities Act, against us.  In connection with such proceedings, we made an offer of settlement and consented to the entry of a cease and desist order, in which we neither admitted nor denied liability, which was approved by the SEC on November 20, 2008.  The cease and desist order included a finding that we violated the registration requirements of the Securities Act, and required that we cease and desist from committing or causing any violations and any future violations in the future.

 

·                  On November 25, 2008, we entered into a settlement agreement with state securities regulators, to resolve matters relating to the sale and offer of unregistered securities and the omission of material facts in connection with the offer, sale or purchase of a security in various states.  Under terms of the settlement, we agreed not to offer or sell any securities in any jurisdiction until we are in compliance with that jurisdiction’s securities registration laws.  We also agreed to pay a fine of up to $1 million to the states.  The $1 million penalty is to be allocated among the states where we conduct business, based on the loan sale transaction volume in each state.  However, we will not be required to pay any portion of the fine to those states which elect not to participate in the settlement.  We have accrued approximately $425,000 in connection with this contingent liability in accordance with SFAS No. 5, Accounting for Contingencies.  In consideration of the settlement, the states will terminate their investigation of our activities related to the sale of securities before November 24, 2008.

 

·                  On November 26, 2008, a class action lawsuit was filed against us the Superior Court of California, County of San Francisco, California.  The suit was brought on behalf of all loan note purchasers in our online lending platform from January 1, 2006 through October 14, 2008 and alleges that we offered and sold unqualified and unregistered securities in violation of the California and federal securities laws.  The lawsuit seeks class certification, damages, the right of rescission and the award of attorneys’ fees and costs against us.

 

As a result of our prior operations, our lender members who hold these loans may be entitled to rescind their purchase and be paid their unpaid principal amount of the borrower loans plus statutory interest.  In addition, As of September 30, 2008, the aggregate principal balance of loans purchased through our platform by purchasers not affiliated with Prosper was $178.6 million.  We have not recorded an accrued loss contingency in respect of this contingent liability, although we intend to continue to monitor the situation.  Generally, the federal statute of limitations for noncompliance with the requirement to register securities under the Securities Act is one year from the violation; however, the statute of limitations periods under state laws may extend for a longer period of time.  If a significant number of our lender members sought rescission, or if the class action securities lawsuit is successful, our ability to maintain our platform and service the borrower loans to which the Notes correspond may be adversely affected.

[Xenon481]

Per Prosper's new S-1:

http://www.sec.gov/Archives/edgar/data/1416265/000110465908074769/a08-29602_1s1a.htm#RisksRelatedToProsperOurPlatformA_051317

. . .

As a result of our prior operations, our lender members who hold these loans may be entitled to rescind their purchase and be paid their unpaid principal amount of the borrower loans plus statutory interest.  In addition, As of September 30, 2008, the aggregate principal balance of loans purchased through our platform by purchasers not affiliated with Prosper was $178.6 million.  We have not recorded an accrued loss contingency in respect of this contingent liability, although we intend to continue to monitor the situation.  Generally, the federal statute of limitations for noncompliance with the requirement to register securities under the Securities Act is one year from the violation; however, the statute of limitations periods under state laws may extend for a longer period of time.  If a significant number of our lender members sought rescission, or if the class action securities lawsuit is successful, our ability to maintain our platform and service the borrower loans to which the Notes correspond may be adversely affected.

I have already (Thursday 12-4-2008) sent a Customer Support Request in to PMI requesting such, but have yet to hear back from them.

[beerbud1]

poof

[Senator]

Prosper got $40M of VC, not $20M..

Are we really sure Prosper got the entire $40 million?  Did the VCs write a $20 million check, followed by another $20 million check?  I suspect not.  I bet Prosper was promised $40 million, but the VCs make payments.  Perhaps 40 $1 million installments.  Which, undoubtedly, stopped when the securities violations were found. (I mean "quiet period" started.)