Articles by deBanked Staff
Embezzler Used Funds to Pay Lending Club Loan
August 14, 2016Brian T. Cisek pled guilty last week to charges of embezzlement and theft of union funds. A postal worker employee and chairman of the Muscular Dystrophy Association Charity Committee operated through the postal union, Cisek embezzled approximately $9,000 from the charity between January 2013 and September 2014.
According to the plea agreement, Cisek at one point duped the union into giving him a $500 advance to pay for various setup costs of the charity’s upcoming golf outing. But once he received the funds, he used them to make an overdue loan payment to Lending Club.
The statutory maximum sentence that the court can impose for his crime is 5 years imprisonment, 3 years supervised release and a fine of $10,000 or twice the gross gain or gross loss resulting from the offense.
The case number is 1:16-cr-00149-RJJ in the Western District of Michigan, Southern Division in the United States District Court.
Bloomberg’s Cory Johnson Reads Between the Lines On Lending Club
August 8, 2016Fifteen out of Lending Club’s top twenty investors have returned to the platform since the May scandal albeit at lower levels, said Lending Club’s CEO Scott Sanborn. Bloomberg News’ Cory Johnson said that the other way to read this is that a quarter of their investors have refused to come back.
Meanwhile, company CFO Carrie Dolan was still on the earnings call despite having announced her resignation moments before. Referencing the use of investor “incentives” to get investors to come back, Dolan explained that the company still anticipated higher investor acquisition costs going forward. Johnson said that this could mean for a long time, putting even more pressure on a company that has slim margins to begin with.
Watch the short clip with Johnson below:
Video not loading? View here
Lending Club Q2: CFO Resigns, Originations Shrink, Huge Losses
August 8, 2016
Another earnings, another resignation. This time, it’s CFO Carrie Dolan who will be replaced in the interim by the company’s corporate controller Bradley Coleman.
In Q2, the company netted a loss of $81.4 million, compared to $4.1 million a year ago. The shocking increase is partially attributed to a $35.4 million write-down of Springstone’s Goodwill, the patient financing company they acquired two years ago. Meanwhile, professional service fees increased by $14.9 million as a result of all the lawyers and auditors required to handle the recent scandal. During the Q&A, Company CEO Scott Sanborn explained that such professional service fee related work were not one-time costs and would continue to an extent.
“Our efforts to reengage investors are working, with fifteen of our top twenty largest investors back on the platform today,” said Sanborn in a statement. However, it was unclear as to whether or not those investors will buy at the same levels as before and the five who haven’t returned were unnamed so the supposed rebound in confidence remains vague.
Retail investors remained fairly resilient, investing over $327 million in Q2, up 16% year-over-year. With 135,000 active individual investors, that means the average retail investor invested a little under $2,500 on the platform during the quarter.
Originations shrank from $2.75 billion in Q1 to $1.96 billion in Q2.
The company still managed to have $832 million in cash on its books and is therefore in a relatively strong position to escape its current problems.
Should Marketplaces Have Skin In The Game?
July 10, 2016
These answers were offered by the following execs to the question over whether or not lending marketplaces should have skin in the game, during a panel at LendIt in April.
Gilles Gade, Cross River Bank YES
Jeffrey Meiler, Marlette Funding NO
David Johnson, First Associates IT DEPENDS
Sid Jajodia, Lending Club YES (but it depends on what skin means)
THEIR EXPLANATIONS:
Gilles Gade said it’s not only for the platforms but for the banks sponsoring the platforms to put loans on their balance sheet as well to qualify and perfect the status as true lender.
Jeffrey Meiler said that it shouldn’t be a requirement but something you want to do because it’s a superior value proposition.
David Johnson said that if we’re talking about retail investors then skin in the game is very appropriate. If we’re talking about institutional investors, then I don’t think it’s necessary.
Sid Jajodia said it depends on what “skin” means. From his perspective, if you don’t deliver a value proposition to one side of the market, which is the investors, you don’t have a market so there’s inherent skin in the game by being a marketplace.
Pearl Capital Secures $20 Million Financing Deal
June 22, 2016
NYC-based Pearl Capital has secured $20 million from Arena Investors, LP.
In their official company announcement, Pearl CEO Solomon Lax said, “With the support of our outstanding financial partners we can continue to expand our mission of supplying funding to any small business with the desire for capital and ability to thrive.”
Pearl Capital was acquired by Capital Z Partners last year.
Are You Ready to deBank Again?
June 8, 2016As the newest issue of deBanked magazine prints, the question remains, are you subscribed to receive it?
The May/June issue delves deeper into the legislative events taking place in Illinois, a summary of industry trips to Washington DC, an interview with Capify’s David Goldin, a recap of LendIt and more.
Subscriptions are FREE and yes, it’s a physical publication.
In a first, Bizfi crosses $144 million in Q1 funding
May 17, 2016
Thanks to the partnership with Western Independent Bank, Bizfi had a record Q1 to date with $144 milion in loan originations.
The New York-based fintech company funded 3,605 small businesses, a 49 percent increase from $96 million funded in Q1 last year, Bizfi said.
The partnership with Western Independent Bank in March this year opened up several markets in the midwest and west coast Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada New Mexico, Oregon, Utah, Washington and Wyoming can benefit from this partnership. Referring to the partnership, Bizfi founder Stephen Sheinbaum said, “These types of relationships not only help to fuel Bizfi’s growth, they ensure the financial partner continues to maintain their customer relationships by providing their clients an alternative for the financing they need,”. “In 2016, we’re looking forward to further expanding our product set and partnering with more traditional financiers, enabling us to fund the growth of even more of America’s small businesses.”
Bizfi’s marketplace partners with lenders like OnDeck, Funding Circle and Kabbage and the company has so far funded 29,000 small businesses with $1.6 billion in capital since 2005.
China Ponzi Scheme: Police Crack Down on Shanghai Lender, Wealthroll
May 16, 2016
The crackdown of newfangled finance firms that emerged from the ashes of the Ezubao ponzi scheme opened up a can of worms.
And the latest head to roll is of Xu Qin, owner of Shanghai-based wealth management firm, Wealthroll Asset Management Co. who confessed to the authorities that his company still owed 5.2 billion yuan ($797 million) to 12,800 investors. Qin and 34 other executives from the firm were arrested on May 13th.
Qin who started the firm in 2011 with an initial investment of 5 million yuan from friends and family allegedly misused investor money on homes, luxury cars and on buying high-end office spaces for the firm in Shanghai.
This emerges in the wake of the shakedown of Ezubao, the Chinese P2P lending site which duped 900,000 investors of $7.6 billion in February this year. Following which, the Chinese police were ordered to shut down illegal online lending sites and take swift action against suspects.
The Ministry of Public Security also launched an online platform in a quest to garner more information from the public and warned of P2P lender defaults in June, when payments will be due.
The country’s banking regulator, China Banking Regulatory Commission (CBRC) and insurance regulator had also alerted the risks associated with investing in these schemes and barred these lenders from raising funds and signaled that close to 1,000 such businesses accounting for 30 percent of the industry could go belly up.
The Ezubao scam that surfaced on February 3rd revealed that 266 executives of Chinese P2P companies had fled and gone into hiding in the last six months. Ratings agency Moody’s has said that 800 platforms have already failed or were recently facing liquidity issues.
