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.

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.

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.

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-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.

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.

Prosper-watcher Xraider reports  on a new development in the ongoing litigation involving Prosper Marketplace.

Prosper, through another fancy (read: expensive) San Francisco law firm, has brought a breach of contract and “bad faith” suit against its insurer, Greenwich, for refusing to defend it in the class action. 

Ongoing discussion on this matter can be found at Prospers.org.

You can access the court docket info here.

There was court action yesterday in the class action lawsuit against Prosper Marketplace (Prosper.com). As Prosper-watcher Investar points out here, Judge Kramer sustained the demurrer filed by the 3 remaining outside directors – this time without leave to further amend. A case mangement conference (CMC) was held – and the next CMC scheduled for October 29, 2009.

* DEVELOPING STORY *

Based on material now made public by the Securities and Exchange Commission (SEC) and presented by members of the Prosper community at Prospers.org, PCASM hopes to allow you to take a peek behind closed doors at what actually took place between the SEC and Prosper Marketplace (Prosper.com) in the period leading up to Prosper being shut down – and what occured in the period that followed.

Some of what is being uncovered is quite remarkable and likely of immense interest to Prosper-watchers.  The work is still unfolding and I recommend reading the discussions currently happening in the public “lobby section” of the community (no registration is required to read discussions in the lobby).

As the discussion matures and I have some time to read and digest, I may post more detailed info here on this blog.  The exchanges between Prosper and the SEC are highly relevant to the ongoing class action litigation filed against Prosper by its lenders.

I’d like to acknowledge community members Investar and NewHorizon for the leg work being performed.

On November 1, 2007, in response to what was (presumably) Prosper’s first attempt at filing their S-1 registration statement, the SEC issued a less-than-enthusiastic response:

 

 

 

 

Re: Prosper Marketplace, Inc.

Registration Statement on Form S-1

Filed October 30, 2007

File No. 333-147019

 

 

 

Dear Mr. Giedgowd:

This is to advise you that a preliminary review of the above registration statement indicates that it fails in numerous material respects to comply with the requirements of the Securities Act of 1933, the rules and regulations under that Act, and the requirements of the form. Specifically, we note a failure to identify all co-registrants, a failure to include the required financial statements, and a failure to abide by the Trust Indenture Act. For this reason, we will not perform a detailed examination of the registration statement, and we will not issue any comments because to do so would delay the review of other disclosure documents that do not appear to contain comparable deficiencies.

You are advised that we will not recommend acceleration of the effective date of the registration statement and that, should the registration statement become effective in its present form, we would be required to consider what recommendation, if any, we should make to the Commission.

We suggest that you consider submitting a substantive amendment to correct the deficiencies or a request for withdrawal of the filing.

 

 

The actual letter can be found here.

Prospers.org discussion can be read here: S-1 Fail

The “Fred93 Letter”
Just like other discriminating Prosper aficionados, the SEC staff reads the Fred93 blog.  This was revealed in a June 12, 2009 letter to Prosper from the SEC in response to Amendment No. 4 to Prosper’s Registration Statement on Form S-1.

Specifically, the mention of Fred93’s excellent blog reads as follows:

 

 

 

In postings on the web regarding performance of Prosper loans by one of your lender members, there have been concerns expressed about the number of reported loans that closed during a particular months changing. Please provide the staff, with a view towards improved disclosure, your originated loans for every month that you operated prior to shutting down your site, the number that went 30, 60 and 90 days past due and the number that entered collection. Also, please address any instance where the number of reported loans in a particular monthly set changed from when they were originated to the currently reported amount. Please refer to http://fred93blog.blogspot.com.

 

 

 
Another notable section of the letter reads as follows:

 

 

 

Note 13 – Commitments and Contingencies, F-22

We note your response and revised disclosure to our prior comment 31; however we do not see how you have addressed our comment in its entirety. Please address thefollowing:

· Tell us how you determined that it was not probable that a liabilty had been incured (refer to paragraphs 8, 37 and 39 of SF AS 5); and

· Justify how your low range estimate (i.e. $0) is appropriate considering suits have been brought and you have no factual defense (specifically regarding the Section 5 violation).

 

 

The actual letter can be found here.

Threads worth monitoring (subject to updates throughout the day)

The SEC reads Fred93

Here’s where Prosper flipped the bird to the SEC

Reference

What did Prosper know and when did Prosper know it?

(or something along those lines..)

In preparation for next week’s action in the Superior Court of California, Prosper’s outside directors have filed a reply brief in response to the August 26 opposition memo filed by the plaintiffs, which was filed in response to the August 10 demurrer to the second amended complaint of July 10, 2009.

The actual document is not yet available for download and, based on our experience with the Court’s web site, it’s difficult to tell if it will, at some point, be made available at all.

That said, it is always good to note progress in this case and we look forward to an interesting week.