...and Prosper returning the full purchase price (plus interest) to the buyer.
Well but if the settlement is for $10mil, then that's the cap (minus legal fees). I haven't done the math, but it seems unlikely that the purchase price would ever be returned in full (much less interest too) for all rescinded loans.
Yes, that is true. But that's simply a function of the fact that a settlement usually never gives 100%, because then there wouldn't be a settlement. By their very nature, settlements are compromises. The Plaintiffs get less than they would with a complete victory, but more than they would if they lost. And the same for the defendants.
Thus, buyers can keep their performing loans, and only rescind their defaulted loans.
...some folks (like xraider?) might argue that even performing portfolios are "damaged" because their ROIs would have been higher had the loans been registered.
IOW, if you're going to argue that portfolios took a hit because the loans weren't registered, then you need to say that ALL portfolios - red or green - took a hit. And once you do this, splitting that $10mil proportional to lender outlays - including to lenders with performing loans - is the only equitable approach I can think of. If that were to happen, lenders in the red would be less red (or green) and lenders in the green would be more green - which, again, strikes me as fair.
Except that any given loan either paid in full or it defaulted. If it paid in full, then the lender got exactly what he bargained for, so had no loss (on that loan), unless you are going to argue that the interest rate would have been higher had Prosper provided more accurate information about the risks. But given the bidding frenzies that used to take place, I doubt that is the case.
If a loan defaulted, then depending on the timing of the default and the interest rate, the lender either lost money or he/she didn't (taking into account statutory interest on the loan). In the latter case, again there is no loss to the lender, so the lender would not choose to tender the loan back to Prosper for rescission. Only in the former case, where the loan defaulted early enough (and/or was at a low enough interest rate) for the lender to lose money would the lender choose to tender the loan back to Prosper for rescission. So perhaps the $10M should be divided pro rata based only on such loans. Of course that may be administratively difficult.
Put another way, let's take the case of a hypothetical lender who made two $25K loans at 15%, both of which paid in full as agreed. It isn't clear to me why that lender should receive anything from the settlement, because he/she suffered no loss from Prosper's illegality. To the contrary, he/she made a tidy profit already on the loans.