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Lending Club plans layoffs, discloses loans to former CEO and family members
- seibelj 10y agoAs someone who built the most popular iOS / Android app for Lending Club investors [0], I can tell you that since the CEO resigned - New users have fallen by 50% per month, although of course users to my app are a fraction of total new users, but you can extrapolate - Total net, users are withdrawing about as much money as users are putting in - The amount of loans purchased has dropped significantly So without a doubt, retail investors know what's going on and fear for the safety of their investments. [0] https://itunes.apple.com/us/app/lendingclub-order/id1046114132?mt=8 https://itunes.apple.com/us/app/lendingclub-order/id10461141...
- maxerickson 10y agoDo you think your users know you are doing analytics on their transactions?
- a_t48 10y agoCan you name a major successful mobile application that you think _doesn't_ use analytics?
- maxerickson 10y agoI dunno, wouldn't the better question be if I am at all comfortable using a third party app for financial transactions? Because I'm not. But I'm not super concerned about me, I'm curious how the thinking goes when someone decides to collect information about the loans that other people are taking out. Maybe they are pretty sure that users understand it, the app could have a strong disclosure for all I know.
- seibelj 10y agoThere is a rich ecosystem of LC apps and services because of LC's open API. The only thing the API's allow you to do is invest in loans and transfer money in and out of your account. I would be quite shocked if any service (such as lending robot) is able to operate without recording any transactions occurring. I hope users wouldn't be offended by the (very general) information revealed above, but I suppose some could.
- jessaustin 10y agoPresumably LC itself is recording the transactions? It's obvious that apps would want to do so as well, but that certainly isn't a necessity. An app could remember a transaction long enough to ensure that it had posted, and then forget about it forever.
- pbreit 10y agoCan you suggest any reasonable concerns with what the app author has disclosed?
- maxerickson 10y agoPrimarily what I allude to in my initial comment, it indicates that they are in possession of specific user information. As I also point out above, I have no idea how informed the users would be about that. I guess that might not meet all definitions of reasonable concerns.
- deleted 10y ago[deleted]
- reitanqild 10y agoNow that I think of it I would almost find it scary if they didn't. All fine with me as long as they are aggregated statistics for a reasonable sized population of users.
- rgovind 10y agoIf I may ask, how well is the app doing? You have good revenues?
- morgante 10y agoYes, ever since this news came out I have been gradually winding down my Lending Club investments.
- rdlecler1 10y agoOff topic question: would an app developer trading on this information be engaged in insider trading?
- rhizome 10y agoIn just world this would result in a prison sentence, banishment from stock exchanges, and revocation of their corporate charter. The fact that there is no capital punishment for companies, especially public ones, provides a moral hazard.
- josho 10y agoI agree. Our society tolerates white collar crime far more than we should. We've got a good handle on things like punishing criminals that rob someone at gunpoint. However, we struggle with seeing the CEO making short term loan to his company as theft from investors (the short term loan hid the fact that the company wasn't meeting its presumably publicly announced growth targets). The issue is that white collar crime needs to show criminal intent. But, in this case the CEO didn't have criminal intent to steal, rather his intent was simply to boost his business (with the consequence of misleading investors).
- rhizome 10y agoI view white-collar crime as primarily an individual act. Corporate crime, such as we saw with HSBC, Dow Chemical, and even Mitchell Jessen, escapes significant punishment, only very rarely rising to criminal conduct. That the conduct is legal, or considered legal, is a policy and legislative outcome. As for intent, the law has centuries of precedent to incorporate into criminal statutes that affect corporate activities. It's just that the standards are artificially high and don't take into account the diffuse nature of the enterprise. But we have several decades of even that which could be applied, but isn't.
- jacquesm 10y ago> capital punishment for companies That's the second time today I see this, is this some kind of meme?
- philovivero 10y agoYes, but it's been around for years. If corporations are persons, and they can commit felonies, why not give them punishments that are analogous to what you'd give a person who committed a felony?
- mikestew 10y agoStock's up 7% as I write this. I'm assuming nothing has been revealed that isn't already at least suspected, and layoffs are generally good for a stock's price. I've already made money on one dip-and-bounce, but currently in at 4.88, so here's hoping it will claw it's way back a little bit. I'm in no way qualified to declare a bottom, but I'm guessing all of the bad news is out of the way. This in no way constitutes investment advice; in fact, I'd steer clear of LC if I were you. But I'm not you, I'm me, and sometimes I invest poorly.
- hkmurakami 10y agoLC has been bouncing up and down with 5-10% daily changes very frequently ever since the news broke about their security fraud and CEO departure. The 7% change today (given the general market rally today) likely means that the market sees this news as neutral.
- mikestew 10y agoYeah, I'm not sure exactly what to make of it. Everything else I track is up 3-4% today, so that's why I view 7% as a positive outlook. But as you point out, it's a pretty volatile stock, so it may just be riding the rest of the market and got a little extra bump from volatility. But personally, I don't try to read tea leaves. Set my stop limits so I don't have to watch it like a hawk, set an alert for the upper limit, and watch LC news strictly for entertainment value. Because thought the story is somewhat interesting, it's not anything we haven't seen before with companies like Tyco and Adelphi.
- hkmurakami 10y agoAh yes Tyco, that was a fun one...
- deelowe 10y agoThe entire market is bouncing back from brexit.
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- tunesmith 10y agoOther than investing in their stock, there's an argument to be made that it might actually be a relatively safe time to invest in their loans.
- ceejayoz 10y agoThe increased scrutiny could reveal much worse, who knows?
- kilroy123 10y agoThat's my logic, I bought stock, and continue to put money into the loans. (I have zero affiliation with Lending Club, just like the returns.)
- vox_mollis 10y agoDefault rates have just hit their lowest point in eight years: https://www.federalreserve.gov/releases/chargeoff/delallsa.htm https://www.federalreserve.gov/releases/chargeoff/delallsa.h... From this halcyon point, there's more downside risk than upside going forward. Unless the cyclical nature of debt defaults suddenly stopped after centuries.
- pmorici 10y agoNothing they have disclosed has caused me to stop investing in their loans. In fact you can get some nice high grade loans on their secondary market from people trying to unload their portfolio at a 3-5% discount to face value. As long as they don't have any debt on the books you are pretty safe. If they did have debt there might be some question about order of payment to creditors.
- rando18423 10y agoWow, so the crown of the "fintech" movement is just as bad as the banks, and the two biggest Silicon Valley successes of the last decade, Uber and AirBnB, are really just cases of massively successful regulatory arbitrage. Nice innovation!
- ocdtrekkie 10y agoIt seems a common way to "disrupt" a market is to find a loophole to call yourself something else so you can avoid all the laws everyone else is beholden to that were put in place for people's protection.
- rando18423 10y agoExactly
- Zarel 10y agoThat sounds pretty legitimate if the laws don't actually protect people, and have been corrupted by wealthy interests, such as taxi medallion owners. Or if the laws are outdated. Ubers are consistently safer than taxis, provide better customer service, don't intentionally take long routes to scam you, actually take credit card instead of pretending their credit card reader is broken, don't refuse to drive you because you have luggage or are going a short distance or are living in a bad part of town, etc etc. It turns out that Uber's rating system is much better for people's protection than whatever laws and background checks taxis are subject to.
- ycombobreaker 10y ago> actually take credit card instead of pretending their credit card reader is broken After you've arrived at your destination, have you really found any taxi driver who would rather take _no payment_ than a credit card? If all you have is plastic--and if the driver is required to accept that form of payment--then I guess I don't see the problem (for riders). I've had drivers take my credit card # on a carbon copy physical swipe. I've had drivers admit that the card reader actually _did_ work. Unfortunately for them, I've even had drivers accept underpayment in cash because they were legitimately unprepared.
- ilamont 10y agoThe latest disclosures Tuesday, uncovered by a company probe, found that in the last few weeks of December 2009, Laplanche and three relatives took out 32 loans for a total of $722,800. All but three of those loans were repaid in full over the next two months, implying they were taken out to artificially goose Lending Club’s loan origination numbers. If true, would that be considered fraud?
- hkmurakami 10y agoI feel like almost every startup that "made it" used dark-hat growth hacking tactics to pad their numbers. But the other companies were typically in the consumer internet space. I would expect some additional rules to exist for a highly regulated market like Finance.
- deleted 10y ago[deleted]
- gogopuppygogo 10y agoThere is some truth to Gilfoyle in the season finale of Silicon Valley when he says: "I think I finally respect you as a CEO."
- jacquesm 10y agoNah, that's 'growth hacking' /s. Really, yes obviously that's fraud but apparently it's perfectly normal as long as you don't get caught. Artificially inflating the numbers whilst shopping for investments is definitely not acceptable. Pumping money around is an old trick to inflate the visible size of a company, some of these schemes are surprisingly hard to detect (the one here definitely isn't). I'm somewhat surprised that there was no oversight in place that would have stopped this, that's serious money.
- deleted 10y ago[deleted]
- ellius 10y ago
- jsemrau 10y ago>"the idea being that safer, higher-yielding loans would be more attractive to investors" Who would have thought that the basic laws of lending apply to fintech startups?
- tsunamifury 10y agoI highlighted several months that their behavior strongly signaled cooked books but I didn't think it would reveal this fast! https://news.ycombinator.com/item?id=11660112 https://news.ycombinator.com/item?id=11660112
- deleted 10y ago[deleted]
- paulvs 10y agoIt's ludicrous that someone would risk their reputation and their company's future for a mere 32 more loans on the company growth report. I can't imagine how these loans made a significant difference to these reports. These revelations could be just a scapegoat for more serious fraud.
- discardorama 10y agoLook at the date: they were made in 2009, when the company was barely a year old. At that time, an additional 730K in loans could have been a needle mover.
- mmsmatt 10y agoI don't think you need to do any of this shady stuff to be a small loan marketplace for unaccredited participants. But the shady stuff kills your chances to feed the CLO pipeline and selling (large batches of) small loans to accredited buyers. So just... why take _these_ risks? It doesn't have a realistic chance of helping any viable strategy that I can think of.
- pm90 10y agoYou answered your question. It is a risk... a risk that not many are prepared to take. LC seems like it serves those who are willing to take that risk in hopes of getting better returns.