Peer-to-peer lending company Prosper, which in November announced plans to launch a digital home equity line of credit product, has been slapped with a $3 million fine for allegedly misleading investors.
According to the Securities and Exchange Commission, Prosper reported inflated returns to investors. The SEC said that between July 2015 and May 2017, the company excluded some non-performing, charged-off loans from calculations of annualized net returns that it reported to investors. As a result, Prosper overstated its net returns to more than 30,000 investors, according to the SEC. Many investors decided to make additional investments in the company based on the overstated returns, the SEC said.
“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,” said Daniel Michael, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “As this case shows, we are committed to holding fintech companies to the same standards applicable to other participants in the securities markets.”
Prosper did not admit or deny the SEC’s findings.