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.

* 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?

While we wait for new developments in the legal proceedings…Prosper.com observer and key statistics tracker Fred93 just updated his excellent blog with observations regarding Prosper’s sadly lacking and much questioned “Post Charge-Off Collection Techniques” operation.

This issue is (and should be) of key importance to anyone contemplating involvement with the Prosper.com peer-to-peer (p2p) lending platform.

Fred93’s important post can be found here.

This issue is also being discussed over at the Prosper Community at Prospers.org.

Prosper lender Fred93 recently obtained a copy of Prosper’s proposed “settlement” with the SEC.  Even better, Fred93 has published access to a copy of the actual “Cease & Desist Order,” which provides interesting insight into the SEC’s thinking.

Fred93’s blog continues to be well worth regular visits.

While slightly off-topic, Prosper lender Fred93 (a top lender and a resourceful community participant whose wide-ranging contributions Prosper has pretty much ignored), provides a monthly update on the rate of new loans going late on Prosper.com.

While always informative and insightful, the January 2009 update strikes me as particularly poignant.

You can read it here.