LendingClub Founder, Ousted in 2016, Settles Fraud Charges

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San Francisco — Renaud Laplanche, a leading figure in Silicon Valley’s effort to challenge the financial industry, reached a settlement with federal regulators on Friday over accusations that he had fraudulently inflated his company’s returns.

The Securities and Exchange Commission charged Mr. Laplanche, the founder and former chief executive of the start-up LendingClub, with improperly changing some of the company’s lending products to make it look more healthy.

The charges are the outcome of a drama that began in 2016, when LendingClub’s board unexpectedly forced Mr. Laplanche to resign.

Mr. Laplanche had been a widely respected figure in both the technology and financial industries. But his board said that he had made several improper decisions.

Under the settlement with the S.E.C., Mr. Laplanche neither admitted nor denied wrongdoing. But he agreed to be barred from the securities industry for three years and pay a $200,000 fine.

Mr. Laplanche, who founded a competitor to LendingClub after his resignation, said that the penalties would not force him to change his role at his new start-up, Upgrade, because the two companies have different structures.

“I am pleased to have worked out a settlement with the S.E.C. to put to rest any issues related to compliance lapses that might have occurred under my watch at Lending Club,” Mr. Laplanche said in a statement.

The charges against Mr. Laplanche are the latest moves that the S.E.C. has taken against high-profile Silicon Valley executives, coming a day after the agency sued Tesla’s co-founder, Elon Musk.

The commission also reached a settlement with LendingClub’s former chief financial officer. In addition, the company will pay a $4 million penalty for the problems that occurred under Mr. Laplanche’s leadership.

But the S.E.C. said that the company promptly fixed the problems and “provided extraordinary cooperation with the agency’s investigation.”

The chairman of LendingClub’s board, Hans Morris, said that the S.E.C.’s charges helped validate the board’s decision to remove Mr. Laplanche in 2016.

“The board’s decision was not made lightly but the violation of the company’s business practices along with a lack of full disclosure by Mr. Laplanche during the review was unacceptable,” Mr. Morris said in a statement on Friday. “We have full confidence in our new management team and we are a better company today.”

Mr. Laplanche founded LendingClub in 2006 and turned it into one of the most prominent start-ups to take on the banks and other financial giants using new technology. The company gave out personal loans, mostly to people who wanted to refinance credit card debt, and sold the loans to investors.

Supporters of the company, and the industry it spawned, said it could replace traditional methods of getting loans. The company drew in luminaries like Larry Summers, the former Treasury Secretary, and John Mack, the former chief executive of Morgan Stanley, to its board. When LendingClub went public in 2014, it was one of the largest initial public offerings that year by a technology company.

After Mr. Laplanche’s departure in 2016, the board said he had not been transparent with them at several different points, including about loans that Mr. Laplanche and his family members had taken out from LendingClub.

The charges announced by the S.E.C. do not touch on most of the accusations the company has made against Mr. Laplanche. In the order released Friday, the regulators focused on funds that LendingClub had overseen on behalf of investors and that were used to buy LendingClub loans.

According to the S.E.C., a division of LendingClub under Mr. Laplanche’s direction had adjusted how the funds were managed without telling investors, in order to create demand for some of the loans that LendingClub was handing out.

LendingClub has struggled to recover from the scandal surrounding Mr. Laplanche’s departure. The company’s shares are worth only slightly more today than the low they hit after his resignation, though they rose modestly on Friday after the settlement was announced.

Mr. Laplanche’s new company, on the other hand, has been growing quickly. It recently announced that it had issued over $1 billion of loans and had closed a series C funding round.

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