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[Beerbud1]

Hey Nonattender, have you ever heard of paragraph's?

[ira01]

One of the other horrible results of the SEC intervention is that the lawsuit of which you're a lead plaintiff
has, as its target, not only Prosper, but, due to the SEC forcing Prosper into adopting this structure, also
the member-dependent notes, which are general obligations of Prosper, and which, whether you realize it
or not, you're threatening, to the detriment of lenders who selected good loans, while you selected badly.

First of all, every Prosper 3.0 is (or should be) aware of the class action, which was pending prior to Prosper 3.0, and which is described in the Prospectus.  So they assumed that risk.  Unlike Prosper 1.0 lenders, who were (wrongly) told that Prosper was not required to register with the SEC.

Second, and more importantly, the individual defendants have lots of money and perhaps insurance.  And while some of the more remote individual defendants may or may not have liability, Larsen and other hands-on individual defendants should have liability, since they were the ones who personally chose to sell unregistered securities.  So there should be plenty of money to satisfy a class action judgment or settlement without leaving the Prosper 3.0 lenders holding the bag.

[nonattender]

First of all, every Prosper 3.0 is (or should be) aware of the class action, which was pending prior to Prosper 3.0, and which is described in the Prospectus.  So they assumed that risk.  Unlike Prosper 1.0 lenders, who were (wrongly) told that Prosper was not required to register with the SEC.

Perhaps they *should be* aware of it, just as certain lenders *should have been* aware that there was
no magical out-clause, which would make Prosper responsible for lenders making loans to people who did
not, in actuality, re-pay those loans.  Of course, as we both *do* know, what people should reasonably
know is often different than what they actually take the time to read, learn about, think, digest, accept,
or, for that matter, what they will, after the fact, openly admit to having known about the whole time...

The net effect of the lawsuit is not to make Prosper more safe, as many here seem to think, but, in fact,
is an attempt by some people, out for an easy payday, represented by a lawyer, out for an easy payday,
not even to "recoup their losses", but to get whatever they can, however they can, from whomever they
can, because at the end of the day, they smelled blood in the water, saw a honeypot of cash and notes,
what they thought were deep and not very well protected pockets, and gave in to the temptation to try
to dip their hands into the pockets, using the pretext of the SEC ruling as both diversion and justification.

So there should be plenty of money to satisfy a class action judgment or settlement without leaving the Prosper 3.0 lenders holding the bag.

Perhaps this is so, perhaps not.  If anyone involved in the lawsuit actually feels this way, I'm sure lenders
would be thrilled to see them pledge not to in any way attempt to go after notes owned by fellow lenders.

After all, taking from current lenders to satisfy former lenders would be wrong.  Does it not strike you, sir?

-t

[JammingJAY]

I hate to quote you NA but "Perhaps they *should be* aware of it" no?

[yankeefan]

First of all, every Prosper 3.0 is (or should be) aware of the class action, which was pending prior to Prosper 3.0, and which is described in the Prospectus.  So they assumed that risk.  Unlike Prosper 1.0 lenders, who were (wrongly) told that Prosper was not required to register with the SEC.

Perhaps they *should be* aware of it, just as certain lenders *should have been* aware that there was
no magical out-clause, which would make Prosper responsible for lenders making loans to people who did
not, in actuality, re-pay those loans.  Of course, as we both *do* know, what people should reasonably
know is often different than what they actually take the time to read, learn about, think, digest, accept,
or, for that matter, what they will, after the fact, openly admit to having known about the whole time...

The net effect of the lawsuit is not to make Prosper more safe, as many here seem to think, but, in fact,
is an attempt by some people, out for an easy payday, represented by a lawyer, out for an easy payday,
not even to "recoup their losses", but to get whatever they can, however they can, from whomever they
can, because at the end of the day, they smelled blood in the water, saw a honeypot of cash and notes,
what they thought were deep and not very well protected pockets, and gave in to the temptation to try
to dip their hands into the pockets, using the pretext of the SEC ruling as both diversion and justification.

So there should be plenty of money to satisfy a class action judgment or settlement without leaving the Prosper 3.0 lenders holding the bag.

Perhaps this is so, perhaps not.  If anyone involved in the lawsuit actually feels this way, I'm sure lenders
would be thrilled to see them pledge not to in any way attempt to go after notes owned by fellow lenders.

After all, taking from current lenders to satisfy former lenders would be wrong.  Does it not strike you, sir?

-t

If I recall correctly, Prosper admitted in SEC filings that they sold unregistered securities, which action carries a possible penalty of recission of the sale.  Prosper has made no offer to any lender that we know about to settle any such sale.  during the period before registration, they were not only non-compliant, but aggressively so (Take THAT, SEC, was the gist of one blog after that got California to allow local sales of loans.)  

During the registration process, they (incorrectly, I think) hid behind the "quiet period" rules and refused tomeet their commercial obligations to report on the collections test, or to pursue those cases, or to respond to many day to day problems that arose in the normal course of business- saying "We can't talk about that."  They didn't even seem to pursue collections on one loan made to a businesswomen wokrking 2 blocks form Prosper HQ!

easy payday?  Prosper has thumbed its nose at the lenders, making it clear that the borrowers are the only customers of significance.   They have doen littel or no validation of information and even identity provided by borrowers.  They advertise a "100% identity theft guarantee", and then slap on a strick definition of same that is impossible to meet without a decision in a lawsuit brought by the person whose identity was "stolen".  

Most of us saw Prosper as a way of doing well by doing good.  Too many borrowerrs (semmingly almost half) saw a way to take other oeoples money.  Prosper management ... who knows-  they have, with exceptions such as andrew, been a great disappointment.

Is my Prosper experience going to make a difference to me financially- no-  I invested 13,300, and it looks like my annual return, all in, will be about -7% per year.  The disappointment with the platform and people who shouted "community" from the rooftops, only to recoil when the community actually materialzed and threatened their shell game, is deep.  My disgust with those who participated in the community, and who were secretly compensated by Prosper to encourage them to do so....  well, I hope it was worth it to them.  

[Nora_Lenderbee]

blah blah blah

easy payday,
easy payday,
blood
honeypot
cash
deep pockets

blah blah blah

Proving he's always a gentleman:

sir

[ira01]

First of all, every Prosper 3.0 is (or should be) aware of the class action, which was pending prior to Prosper 3.0, and which is described in the Prospectus.  So they assumed that risk.  Unlike Prosper 1.0 lenders, who were (wrongly) told that Prosper was not required to register with the SEC.

Perhaps they *should be* aware of it, just as certain lenders *should have been* aware that there was
no magical out-clause, which would make Prosper responsible for lenders making loans to people who did
not, in actuality, re-pay those loans.  

Here you again make the fundamental error that so many "org-bashers" make -- for the bazillionth time, lenders are not looking for a "magical out-clause" to rescue them from choosing bad loans.  Rather, lenders are looking to hold Prosper and its management responsible for any of the many ways that Prosper breached its legal and moral obligations to lenders.  Personally, I would have preferred if the class action sounded in breach of contract, breach of fiduciary duty, negligent and intentional misrepresentation, false advertising and unfair business practices, etc., rather than the securities violations.  That way, the truth could have been uncovered from Prosper's closets, and punitive damages might also be available against Prosper's management.  But I understand why the class counsel prefer to focus on relatively easily proven securities law violations, rather than the highly fact intensive other causes of action.  And as I see it, it is simple -- Prosper knowingly sold unregistered securities, the remedy for which is rescission.  So Prosper 1.0 lenders are entitled to that remedy, and if that winds up hurting Prosper 3.0 lenders, who only invested AFTER the class action was already long-filed, so be it.

[moremoneymarc]

I do see rateladder's logic as to the area Prosper may have tried to pigeonhole their loans into.  If anyone is wondering, I am not aware of any special treatment or reward I may have obtained from Prosper other than Prosper buying back some of my early loans where the data field was displayed wrongly and I took Prosper up on the buy back of those loans at the time when a few others were interested in getting the loans bought back.  Even that took a bit of public pleading in the prosper rooms to finally occur.

What I have been trying to figgure out is how Prosper could effectively isolate lenders money invested in loans to keep it from being lumped into general prosper assets.

I have come up with what seems like a workable idea that I'd like to throw out for discussion.  Yes someone can steal the idea in another thread and pretend you thought of it first..  : ) If Prosper uses this to achieve success I would like a Mustang Convertable tax free (red and cherry)

How about if Prosper M3k (lol prosper 4000 right?)  set up an irrevokable trust for the benefit of lenders that actually owns the loans.  As such I believe the trust could delegate all obtained income from borrowers or from resales to the owners.

As long as I am making up the rules as I go, Prosper 4000 would get all revenue from a 1% loan initiation  fee and a 1% payment processing fee.  Prosper is now totally scalable and has no collection concerns.

Ok now the sticky part, when buying a loan not only would lenders bid on minimal % rate but also on an amount that is available to pursue payments should the loan default.  I am sugguesting 3% that is setaside.
More vindictive lenders could pledge up to 20%.  The trust will have it's own expenses but be almost totally using subcontractors hence another 1% lost to lenders.  Loan info verification occurs within the trust by the same subcontractors who would be pursuing the payments before releasing the money. To be clear a $100 loan could require a lender to put up $103.

Recovery specialists would be granted business based on their collection return and have to be bonded and insured.  They would bid down the fees for the loans available.

Anyhow this is my conceptualization.  Please feel free to attack it or accept parts with merit.

[bankomatic]

First of all, every Prosper 3.0 is (or should be) aware of the class action, which was pending prior to Prosper 3.0, and which is described in the Prospectus.  So they assumed that risk.  Unlike Prosper 1.0 lenders, who were (wrongly) told that Prosper was not required to register with the SEC.

Perhaps they *should be* aware of it, just as certain lenders *should have been* aware that there was
no magical out-clause, which would make Prosper responsible for lenders making loans to people who did
not, in actuality, re-pay those loans.  

Here you again make the fundamental error that so many "org-bashers" make -- for the bazillionth time, lenders are not looking for a "magical out-clause" to rescue them from choosing bad loans.  Rather, lenders are looking to hold Prosper and its management responsible for any of the many ways that Prosper breached its legal and moral obligations to lenders.  Personally, I would have preferred if the class action sounded in breach of contract, breach of fiduciary duty, negligent and intentional misrepresentation, false advertising and unfair business practices, etc., rather than the securities violations.  That way, the truth could have been uncovered from Prosper's closets, and punitive damages might also be available against Prosper's management.  But I understand why the class counsel prefer to focus on relatively easily proven securities law violations, rather than the highly fact intensive other causes of action.  And as I see it, it is simple -- Prosper knowingly sold unregistered securities, the remedy for which is rescission.  So Prosper 1.0 lenders are entitled to that remedy, and if that winds up hurting Prosper 3.0 lenders, who only invested AFTER the class action was already long-filed, so be it.

They continue to be guilty of a lot of the things you describe.

For example:

http://www.prosper.com/welcome/marketplace.aspx

They say estimated return is 14.73% for C-E loans. This is for the period of July 15th to Dec 31s 2009. Let's be real here. Nobody at prosper high up management really believes that your typical lender can make 14.73% on C-E loans. I am very confident they know that very very few people will walk away making 14.73%.

edit:

To prove my point let's take a look at ResearchPro's results who has C- average credit quality which is similar to the credit quality prosper describes.



At 5 months he was actually somewhere around 13-14% then dropped to 9% the very next month and he writes off loans very aggressively. He was almost at exactly the return prosper estimates when his loans were at the age prosper describes. It's clear what happens with age, the return continues to fall. Prosper management knows this. They know that people aren't going to make 14% they pick loans that are relatively young and then put up performance figures that they know are bogus. If you look at ResearchPro's first month he was at like 30%, and now he is at 5%.

edit:
relevant links:

http://forums.go4reward.com/lenders/researchpro's-actual-performance/

http://www.ericscc.com/lenders/ResearchPro

[mothandrust]

Perhaps this is so, perhaps not.  If anyone involved in the lawsuit actually feels this way, I'm sure lenders
would be thrilled to see them pledge not to in any way attempt to go after notes owned by fellow lenders.

But the notes are not owned by lenders.  It says that several times in the prospectus.  Caveat emptor.

Litigation risk is one risk of investment.  If you buy stock in a company which is being sued, you need to evaluate what could happen to your investment if the company loses in court.  Think tobacco, chemical companies, drug companies, etc. 

Companies often will create a reserve to protect against such a claim....

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, since our inception, the aggregate principal amount of loans purchased through our platform by purchasers not affiliated with Prosper was $177.6 million, of which $30.4 million had defaulted, $5.9 million were more than 30 days past due, $81.3 million of principal had been repaid and $66.9 remains outstanding. Prosper is potentially liable for the remaining outstanding principal amount if the current borrowers stop making payments. We have not recorded an accrued loss contingency in respect of this contingent liability, although we intend to continue to monitor the situation.

...but Prosper has decided not to set aside anything, choosing to leave the unsecured bondholders exposed to the full impact of the lawsuit.

[ira01]

They continue to be guilty of a lot of the things you describe.

For example:

http://www.prosper.com/welcome/marketplace.aspx

They say estimated return is 14.73% for C-E loans. This is for the period of July 15th to Dec 31s 2009. Let's be real here. Nobody at prosper high up management really believes that your typical lender can make 14.73% on C-E loans. I am very confident they know that very very few people will walk away making 14.73%.

Although I agree that Prosper continues to make inaccurate and unjustified claims about future performance, which I really wish the SEC would crack down on (since that was one of the major benefits of registration), in fairness it must be pointed out that Prosper 3.0 C-E loans are NOT the same as Prosper 1.0 C-E loans.  Prosper keeps changing the grading scale.  Prosper no longer allows borrowers who were E or HR under the old system from listing at all (along with part of the old D range).  Today's C-E are probably somewhere around yesterday's A-B (too lazy to look up the credit score ranges and port them over). 

[NewHorizon]

Those still inclined to lend probably should wait for Prosper v4.0 when tomorrow's C-E are today's A-B.