Lending club fraud
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Lending Club seemed to be the resource of the most beneficial and uncurtained loans. Yet it turned out to be only a nice illusion to hide numerous shady deals. The irony of the situation is that it was discovered by their devoted fan and investor. And things were even worse for further consideration.

Lending Club Strategy

Lending Club was sometimes called as an eBay for the loans. The company, which was worth about $20 billion, had more than 1.5 million loans in their database. The main concept was matching up loan takers with the potential lenders. The whole business was grounded on innovating and transparency. Moreover, Lending Club opened up full official data with more than 90 paragraphs of information.

Story of the Investor

Namely, this level of transparency attracted Sims. He was a young businessperson, who wanted to create a solid and fair method of credit scoring for the rising generation with no previous loan experience. Valuable information from the financial establishment was a little thing he desperately needed. And that is when he found Lending Club.

Unlucky Time for Revelation

Sims had made hundreds of calls during the two years when he was trying to get the information. But all banks and credit unions were unflinching in the keeping financial privacy. After all these useless efforts, he got himself in the state of deep frustration. It influenced his ability to do routine tasks too.

And Lending Club turned out to be one of the biggest comforts. It followed his principles and ideas, so it is no wonder he became an investor. It got him so much that at the end he lashed out all his retirement capital. Actually, Lending Club made his dream come true. Sims says, that it appeared as a really good example of the practical debt without involving the banking system.

After that, he raked up about a thousand dollars to buy the shareholding in late 2014. The activity was so interesting for him that he started to listen to earnings calls of the company. Now Sims admits that he acted very weird. But exactly one of these calls made his eyes open. Once he heard information about the repeat borrowers, who were estimated to be 14% from all users.

It struck Sims because he was very familiar with the company’s reports. There was a lot of data on the borrowers (career history, income stream, intentions for the taken money), but absolutely nothing about the repeat clients. Maybe if there was a biometric bank verification, the fraud would have been uncovered sooner.

It was a push for him to do research. All the loans he had invested in, were thoroughly looked over. And suspicious things were found. Two of the accounts seemed almost identical. Both of the users lived in the same town and worked at the same place.

Ok, it looks like an extreme coincidence, that might happen once. But it took off from there. The incomes were almost equal and credits were opened in the same month. It got obvious, it was the same person. Although it wasn’t the returned customer, it was the one with the two loans at the same time.

Still, he was treated as two separate borrowers with different interest rates. And that was totally loss-making for the investors but the Lending Club didn’t seem to care, let alone to help the deceived.

The Revelation Itself

And it was only the tip of the iceberg. During the further exploration Sims came to the shocking conclusion. He believed that more than 30 loans of up to the million dollars were taken by only four real persons. There were some hints to that. And all loans were paid back within three months.

Sims was amazed and assumed two variants. Either it was an identity fraud or it was done by the Lending Club in order to boost their figures. It seemed unbelievable. Lending Club was known as the best of the companies in the industry. What happened next was even more than shocking. Almost three weeks ago Lending Club brought out the fact, that its founder Laplanche and three members of his family had taken these 32 loans. Exactly those which Sims discovered.

After that, Lending Club lost half its value. They had had other significant problems, but it is reported the company is on track again and tries to rebuild what was lost.