Welcome.
Prosper turned out to be a big stinking pile of turd, due to its arrogant and incompetent management and its disdain of lenders, its true customers (although Prosper never saw us that way).
For the last couple months Prosper hasn't been able to originate any new loans, because the SEC determined that it had been unlawfully selling unregistered securities (the loans) to lenders. It is in the process of registering with the SEC, although Prosper 2.0 will look very different. See
http://www.prospers.org/forum/prosper_order_to_cease_and_desist_by_sec-t10903.0.htmlProsper also paid a $1 million fine to settle similar claims with the states.
http://www.prospers.org/forum/nasaa_announces_national_settlement_with_prosper_marketplace_inc-t10991.0.htmlProsper has been sued in a class action lawsuit over the unregistered securities issue. Two .ORGers are the named plaintiffs -- beerbud1 and Urbi. Bama used to also be a named plaintiff, but he withdrew.
http://www.prospers.org/forum/attorney_advertising-t10912.0.htmlAlthough a few lenders are doing OK, for most Prosper turned out to be a terrible investment. It looks like around 40% of all Prosper loans will eventually wind up defaulting.
http://www.prospers.org/forum/prospercom_010109_late_loan_stats_update-t11459.0.html The last time I checked (a month or two ago), the median projected ROI for all moderately seasoned Prosper lenders (>20 loans and an average loan age >6 months) was about 2.5%. Lots of lenders have negative projected ROIs. And given the macroeconomic conditions, one would expect loan performance to get steadily worse in the future.
There are several threads here about the tax treatment of defaulted loans. I'll try to find them and link them here. Basically, loans that were "charged-off" should be reported as non-business bad debt in the short-term capital gain section of your Schedule D.
http://www.prospers.org/forum/got_prosper_1099_damn-t11740.0.htmlLending Club is still in operation, after a similar shut down and reopening following SEC registration. Zopa shut down. Fynanz shut down. There are forums here for them as well.
ETA: added links.