Fred93: Prosper.com is near bankruptcy?

Respected Prosper-watcher Fred93 has published a statement suggesting that all available indicators now point to Prosper Loans Marketplace being close to running out of cash needed to sustain their ongoing operations.

Fred93’s statement can be found here.  As is often the case, Fred93 and the Prosper community are discussing this issue over at Prospers.org.

Fred93’s analysis is eerily similar in conclusion to that of an item published here at PCASM in late November 2009 (How Long Can Prosper Survive?).

Court holds lunch conference

In the ongoing litigation filed by lenders against Prosper Loans Marketplace, some minor lunch-action took place yesterday.

The plaintiffs filed a joint case management conference statement and the judge entered an order of judgment related to the dismissal, sustaining without leave to amend, the demurrer to the second amended complaint files by defendants Breyer, Cheng and Kagle.

No word on whether the parties enjoyed their lunch, but everyone agreed to meet again on April 9, 2010.

Bon appetit!

You are unlikely to Prosper

While we wait for further developments in the litigation against Prosper Loans Marketplace (Prosper.com), a recent investigative news article is rapidly making the rounds within the Prosper community.  Written by Mark Gimein of The Big Money, the piece entitled You are unlikely to Prosper is widely considered one of the very few articles written about Prosper which relied on independent research by the writer, rather than regurgitation of selected data provided by Prosper’s marketing department.

Lenders have asked Prosper.com to comment on the piece, but as has become increasingly common, Prosper responsed by deleting the question, followed by deafening corporate silence.

Whatever your feelings about Prosper Loans Marketplace and peer-to-peer lending, this article is well worth a read.

UPDATE: Prosper has issued a response to the article on their blog.  Unfortunately, the response is unimpressive and lacking in substance.  In typical fashion, Prosper basically just wants the piece deleted.  It’s a remarkably clumsy response for a company claiming to be on the leading edge of peer-to-peer “disintermediation”consumer-empowerment technology.

Prosper Watcher Xenon481 provides a helpful step-by-step analysis and response to Prosper’s “open letter” response here.

Prosper Class Action – 2009 in Review

The wheels of justice are turning, but progress is slow.  At the end of the year, I thought it appropriate to provide readers with a re-cap of some notable events and developments in the ongoing class action litigation involving peer-to-peer lending company Prosper Marketplace (Prosper.com).

January

• Plaintiffs moved for the case to receive “Complex Designation” 
• Plaintiff Barnwell dismissed without prejudice
• Defendant Hazen dismissed without prejudice

February

• Complex Designation approved
•  Single assignment to Judge Kramer
• Defendants file Demurrer to Complaint
• Plaintiffs file 1st Amended Complaint

March

• Plaintiffs file amended notice of motion for an order granting class certification

April

• Defendants file answer to 1st Amended Complaint
• Outside Director defendants file notice of Demurrer to 1st Amended Complaint
• Plaintiffs submit multiple filing s related to memorandum of points and authorities in opposition to Demurrer

June

• Defendants (outside directors) submit multiple filings (replies and objections) related to the April filings

July

• Judge Kramer sustains Demurrer (filed by Outside Directors) to 1st Amended Complaint
• Judge Kramer enters stipulation and protective order
• Plaintiffs file 2nd Amended Complaint
• Court and counsel confer on issues related to selecting a mediator

August

• Outside Director defendants file Demurrer to 2nd Amended Complaint
• Plaintiffs file Memo of P&A in opposition to the Demurrer
• Prosper files a separate complaint against Greenwich Insurance Company

September

• Outside Director defendants file a reply brief in support of their Demurrer
• Judge Kramer sustains the Demurrer to 2nd Amended Complaint filed by the Outside Director defendants, without leave to amend

October

• Outside Director defendants file objections to plaintiffs proposed order sustaining the Demurrer to 2nd Amended Complaint
• Court and counsel confer on discovery and mediation issues
• Court orders further mediation
• Counsel for the defense advise the court of a pending copmplex designation application of a related action (Prosper vs. Greenwich)
• The Court will grant the application and consolidate the actions
• The Court schedules the next Case Management Conference for January 2010.

(Compiled from court documents )

Judge grants complex designation in Prosper’s suit against insurance carrier

In the suit filed by Prosper Marketplace against Greennwich Insurance Company, Judge Kramer of the Superior Court of California – County of San Francisco has GRANTED the application for approval of complex designation, which was filed August 21, 2009.

Additionally, Judge Kramer ordered that this entire action be assigned for all purposes to the Complex Litigation Department.

Those already following the class action litigation filed by Prosper lenders will note that this is the very same Judge Kramer who is overseeing the lender litigation.  In other words, as the insurance litigation is related to the lender suit, Judge Kramer will be handling both.

A case management conference has been scheduled for April 9, 2010.

Background information available here.

Better Business Bureau Rates Prosper.com a D+

Based on Prosper’s operating history and as many as 43 complaints filed with the organization, the Better Business Bureau has provided Prosper Marketplace (Prosper.com) with a rather generous rating of D+ (on a scale from A+ to F).

The complaints filed against Prosper Marketplace covers a wide variety of issues, including false advertising, misrepresentation, unauthorized bank debits, billing errors, failure to honor contracts, failure to respond to phone calls, warranty complaints, etc.

You can read the BBB’s report here.

CMO Catherine Muriel Departs Prosper

Based on a press release issued today by Support.com, it appears Prosper’s Chief Marketing Officer, Catherine Muriel, has left the company.  While the circumstances of Muriel’s departure are unknown, this marks yet another high-profile executive departure from Prosper.com.

Related: Management Exodus Continues at Prosper Marketplace.

How long can Prosper survive?

Prosper has made much about the recent addition of Mr. Nigel Morris to its board - and the $1 million he brought along to the party.

As has already been noted by observers with deeper insight into the mechanics of all things Prosper, this cash infusion is little more than a minor bridge-loan, priced at a relatively steep 15% interest.  It is rather unclear how this fairly insignificant loan will impact Prosper’s future or delay what appears to be the inevitable demise of the company, as it continues on track to run out of operating funds in the near term.

On November 16, 2009, Prosper filed a 10-Q document with the Securities and Exchange Commission, which provides interesting insight into Prosper’s financial health.  Based on what is known about Prosper cash burn, the recent cash-infusion only buys Prosper an additional couple of months, with Prosper now expected to go broke in February 2010.

Despite the lackluster pace of new loan originations, there is some sense that there is still some potential value yet to be unlocked in this company.  What also remains unclear, however, is the extent to which Prosper is in a position to attract additional investments on favorable terms to operate beyond February 2010, considering the general current economic climate, the uncertainty regarding the viability of Prosper as a going concern, the current regulatory framework and Prosper’s situation with unresolved litigation.

Prosper.com Paradise Lost; Deadbeats Won

Prosper-watcher Fred93 recently published a notable item on his blog, titled “Prosper.com Paradise Lost; Deadbeats Won.”  While Fred93’s summary of a meeting in Los Angeles between Prosper co-founder Chris Larsen and a number of lenders and borrowers may seem oddly trivial to those not intimately familiar with Prosper, Fred93 uses this meeting as a backdrop to highlight important nuances related to the Prosper experience. 

Set against this backdrop, Fred93 proceeds to dissect the lackluster efforts of Prosper’s Vice President of Operations, Doug Fuller, including his infamous “Big Hat, No Cattle” memo and the dismal failure of Prosper’s secret “legal test strategy.”

Few people are as intimately familiar with Prosper.com as Fred93.  His blog is a must-read and, if you decide to only read ONE blog post about Prosper Marketplace, then this should be the one you read.

Fred93’s shocking blog entry can be found here.

Then, join the discussion taking place at Prospers.org.

Greennwich Answers Prosper

Things are quiet on the litigation front, but there was another procedural development today in the sidebar where Prosper Marketplace has filed suit against Greennwich Insurance Company.  Earlier today, Greennwich filed their Answer to First Amended Complaint with the Superior Court of California.

View the docket information here.

Some additional background here.