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[Beerbud1]

http://www.metnet.mt.gov/newslinks/I02B0B953

FOR IMMEDIATE RELEASE
May 19, 2009


Lindeen: Unregistered Securities Will Not be Tolerated in Montana


State Auditor Reaches Agreement with Prosper Marketplace Inc.
Over Sales of Unregistered Securities



(Helena) State Auditor and Commissioner of Securities and Insurance Monica Lindeen today sanctioned a San Francisco company whose unregistered securities schemes defrauded nearly $400,000 from Montana investors.


Lindeen's office signed a final Consent Agreement and Order with
Prosper Marketplace, Inc., a San Francisco-based online "peer-to peer" lending service, to resolve matters relating to unregistered securities and securities fraud.


"My message is clear," Lindeen said. "If you prey on Montana investors with unregistered securities schemes, or seek to profit from duping unsuspecting Montanans we will find you and we will punish you."


Prosper has sold 4,479 notes to Montana residents for an aggregate investment of at least $396,510. Lindeen said the notes issued by Prosper are securities, but they were not properly registered for sale. All securities sold in Montana must be registered with the Montana State Auditor's Office before they can be sold to the public.


During the investigation of Prosper, it was determined that the firm also failed to provide investors with necessary information, such as its financial statements.   


Under terms of the settlement, Prosper agreed not to offer or sell any securities until it is in compliance with Montana's securities registration laws. The order also requires Prosper to pay a fine of $2,214, representing Montana's pro-rata share of a $1 million settlement negotiated by a multistate working group of state regulators formed by the North American Securities Administrators Association (NASAA).


Prosper provides a private online lending "marketplace" that allows prospective borrowers and lenders to find one another. Through its website, Prosper conducts an electronic auction to fund unsecured promissory notes. The website features a list of potential loans and investors bid against each other to finance the loans. Funds from the lowest bidders are pooled together to fund the loans. Prosper issues notes to those lenders funding the loans and services that note.


Several states had been investigating Prosper's activity last year and were considering or preparing enforcement actions. In mid-October 2008, Prosper stopped issuing new loans and accepting new investors while it sought registration with the U.S. Securities and Exchange Commission.


From February 2006 to mid-October 2008, Prosper had offered and sold promissory notes with fixed annual interest rates ranging from 7 percent to 36 percent, amortized over a three-year term with equal monthly payments. As of September 29, 2008, Prosper's website reported that it had 810,000 members and $175 million in loans funded.



Caution for investors:


Investors need to be especially cautious now because scam artists will use the recent downturn in the stock market to exploit investors' anxiety about increasing their earnings.


Even when investing with someone she or he knows, investors should verify the registration of sellers and investment opportunities and investigate disciplinary histories by contacting the Montana Auditor's Office Securities Division at 406-444-2040 or toll free at 1-800-332-6148.


###             


Jessica Rhoades
Communications Director/Policy Advisor
Montana State Auditor's Office
444.3152 o
422.8817 c
JRhoades@mt.gov

[bamalucky]

FOR IMMEDIATE RELEASE
May 19, 2009

 

[Tokyo Joe]

unregistered securities scheme

Is this how it will all end?  In the end, was this it?

D'oh, I feel like such a sucker.  

[cowdog]

unregistered securities scheme

Is this how it will all end?  In the end, was this it?

Yup, the whole thing was a con game.

[brianguy]

unregistered securities scheme

Is this how it will all end?  In the end, was this it?

Yup, the whole thing was a con game.

apparently Montana thinks so     they put their standard disclaimer at the end.  almost make this sound like some kind of lottery scam or ponzi scheme or something,

Caution for investors:


Investors need to be especially cautious now because scam artists will use the recent downturn in the stock market to exploit investors' anxiety about increasing their earnings.

I wonder if they feel the same way about LC etc, because they are registered securities vs. unregistered.  makes you wonder if Prosper just bowed to the SEC and said "thank you sir may I have another" if these latest repurcussions would be happening (I say, not likely).

[Urbi_et_Orbi]

"My message is clear," Lindeen said. "If you prey on Montana investors with unregistered securities schemes, or seek to profit from duping unsuspecting Montanans we will find you and we will punish you."

Anyone else unimpressed with a fine in the amount of $2,214 to settle what Montana labels security fraud?

Prosper has sold 4,479 notes to Montana residents for an aggregate investment of at least $396,510.

[NewHorizon]

If the ruling in the class action lawsuit compels Prosper to repurchase all loans, then the "aggregate investment" is $0.  

[Fred93]

"My message is clear," Lindeen said. "If you prey on Montana investors...

Anyone else unimpressed with a fine in the amount of $2,214 to settle what Montana labels security fraud?

If you prey on Montana investors, we will charge you $2,200.  

Prosper has sold 4,479 notes to Montana residents for an aggregate investment of at least $396,510.

$2,214 / 4,479 = $0.49 per note sold in Montana.

Boy they are tough.

[ICanLickMyBalls]

"My message is clear," Lindeen said. "If you prey on Montana investors...

Anyone else unimpressed with a fine in the amount of $2,214 to settle what Montana labels security fraud?

If you prey on Montana investors, we will charge you $2,200.  

Prosper has sold 4,479 notes to Montana residents for an aggregate investment of at least $396,510.

$2,214 / 4,479 = $0.49 per note sold in Montana.

Boy they are tough.

yea well, those dudes up there in montana are badasses.

[lenderguy]

The order also requires Prosper to pay a fine of $2,214, representing Montana's pro-rata share of a $1 million settlement negotiated by a multistate working group of state regulators formed by the North American Securities Administrators Association (NASAA).

The total fine is $1M.  $2,214 is Montana's share of that.  I donno, but $1M is a big enough fine to get the attention of a startup, no?

[bamalucky]

The order also requires Prosper to pay a fine of $2,214, representing Montana's pro-rata share of a $1 million settlement negotiated by a multistate working group of state regulators formed by the North American Securities Administrators Association (NASAA).

The total fine is $1M.  $2,214 is Montana's share of that.  I donno, but $1M is a big enough fine to get the attention of a startup, no?

Who got the big money?

[Investar]

Who got the big money?

Probably no one yet. The deal was only finalized late April. You can kinda figure who will get the most dough. The divvy is the $1 million pie divided by dollar value of loan notes in each state. Prosper's latest S-1A details the NASAA agreement. I boiled it down (here) on SCP Forum "Quiet" DIary. Prosper figures they'll pay out half the $1 million fur shure, can't be certain which states may opt out and sue separately. I'd expect most states will ballyhoo their catch-a-thief like Montana did when they accept their piece of the pie — it's great PR, just too good to pass up, you know?