The Securities and Exchange Commission (SEC) said a San Francisco-based lender would pay a $3 million penalty for miscalculating and materially overstating annualized net returns to retail and other investors.
Prosper Funding LLC miscalculated and materially overstated annualized net returns to retail and other investors. From July 2015 to May 2017, Prosper excluded certain non-performing charged off loans from its calculation of annualized net returns reported to investors. As a result, Prosper reported overstated annualized net returns to more than 30,000 investors on individual account pages on Prosper’s website and in emails soliciting additional investments from investors.
“For almost two years, Prosper told tens of thousands of investors that their returns were higher than they actually were despite warning signs that should have alerted Prosper that it was miscalculating those returns,” Daniel Michael, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, said. “As this case shows, we are committed to holding fintech companies to the same standards applicable to other participants in the securities markets.”
Authorities added Prosper did not admit nor deny the findings while consenting to the entry of an SEC order finding it violated the antifraud provision contained in Section 17(a)(2) of the Securities Act of 1933.