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.

(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.

There are reports today that Prosper Marketplace (Prosper.com) has suspended the user accounts of the plaintiffs named in the proposed class action suit filed against Prosper.

It is not surprising that Prosper (the ”North Korea of peer-to-peer lending”) yet again attempts to punish (if that’s what you would call being protected from making new loans) or stifle critical voices.  It is also not surprising that it took ever-efficient Prosper close to 10 months to get around to it.

The State of Connecticut Department of Banking has sanctioned Prosper Marketplace (Prosper.com) for the sale of unregistered securities (approx. 25,000 notes) to 600 resident of Conecticut in the total amount of $2.2 million.  Additionally, the State of Connecticut found that Prosper failed to make required disclosures and financial statements available to investors.

You can read the Consent Order here.

Additional discussion is also taking place within the Prosper Community at Prospers.org.

Earlier today, plaintiffs filed their answer to the August 10 demurrer filed by the outside directors in response to the Second Amended Complaint, which was filed by the plaintiffs on July 10.

The file has not yet become available to the public via the Court’s web site.

The next hearing in the case still appears to be scheduled for September 15, 2009.

This is video from the “Town Hall” meeting at Prosper Days 2007

This is video from the “Town Hall” meeting at Prosper Days 2008

Earlier today, defendants Breyer, Kagle and Cheng filed their demurrer to the lenders’ 2nd amended complaint with the Superior Court of California in the ongoing class action  litigation against Prosper Marketplace (Prosper.com) related to the sale of unregistered securities.

The hearing on the demurrer has been scheduled to occur in San Francisco on September 15, 2009 – the same hearing already on the Court’s schedule as a “complex litigation” hearing.

Looks like several key issues will come before the court on this date.

(Hope to have access to the scanned document from the court soon)

Peer-to-peer lender Prosper Marketplace has openened for business (at least in a few states).  The Prosper.com Class Action Suit Monitor welcomes potential new market participants to check in with this blog to keep up to date with developments related to the ongoing legal action against Prosper.

Additionally, it is highly recommended that new P2P lending participants become acquainted with the community of experienced Prosper lenders and borrowers at Prospers.Org.

To learn about the ongoing litigation, please view the case dockets at the web site of the Superior Court of California.

 Welcome to the madness and…caveat emptor.

Prosper-watcher Investar continues to keep a keen eye on developments in the ongoing legal saga.  Investar has kindly offered me the permission to re-post his content (which I may decide to do on occasion) – and I will, of course, indicate when this is the case and give due credit and attribution.

Class Action Lawsuit
Prosper Wins A Temporary Reprieve
Second Session in Court
(update 1)

ORDER SUSTAINING DEMURRER TO FIRST AMENDED COMPLAINT
During the courtroom session on July 9, 2009, the judge officially handed down his ruling on the Demurrer by Prosper’s Outside Directors. The ruling effectively rendered lender’s “First Amended Complaint of Securities Violations” null and void. Judge Richard Kramer found the lenders failed to “state facts sufficient to constitute a cause of action” in two of their six allegations.

The judge said there was insufficient evidence each lender should receive up to $10,000 in addition to recovery of their actual losses because Promissory Notes (borrower’s loans) Prosper sold them should have been registered as securities and were not (item 3 of 6 in their complaint). There was also insufficient evidence Prosper failed to do due diligence in determining how the Promissory Notes in question should be sold, and especially the claim its directors failed to exercise reasonable care in structuring the loan sales (item 6 of 6).

Prosper’s reprieve is short lived at best. In the order, the judge granted the lenders “leave to amend and file a Second Amended Complaint” and ordered the document to arrive at his court no later than today, July 10.

ORDER – STIPULATION AND PROTECTIVE ORDER
Also during the July 9 session, the judge recognized the “Protective Order” drafted by Morrison & Foerster, Prosper’s law firm, and ordered the parties to follow that protocol when making interrogatories, motions or requests for production of documents, requests for admissions into evidence, and when taking depositions.

ORDER GRANTING APPLICATION OF NICOLE K. SERFOSS
As Beerbud1 pointed out, Nicole Serfoss of Morrison & Foerster’s Colorado office was recognized as “Pro Hac Vice” member of Prosper’s legal team. 

definition PRO HAC VICE:  Latin for “for this occasion” or “for this event,” (literally, “for this turn”) is a legal term usually referring to a lawyer who has not been admitted to practice in a given jurisdiction (officially licensed and recognized there) but is being allowed to participate in a particular case in that jurisdiction.

Read the original post here.

UPDATE: Minutes from the proceedings are available here.

Investar is also tracking developments in the ongoing proceedings against Prosper Marketplace. He adds some color commentary regarding the events of June 11, 2009.

And there you have it, day one with a sitting judge, a court clerk, and a court reporter, and everything. The great wheels of justice uttered their first small squeak and moved ever so slightly off dead center in matters versus Prosper.