(Reuters) - LendingClub Corp (LC.N) has been hit with the first of what could be many federal lawsuits by shareholders who say the online lender, which forced out its chief executive last week, inflated its share price by concealing its inability to monitor its operations.
In a complaint filed late Monday in San Francisco federal court, the plaintiff Steeve Evellard said LendingClub misled shareholders into believing its internal controls were strong enough to stop questionable lending practices and ensure proper disclosures to customers.
The complaint said shares plunged as the truth became known, including a 51 percent slide last week, wiping out several billion dollars of the San Francisco-based company’s market value.
A LendingClub spokeswoman declined to comment on Tuesday.
The lawsuit covers shareholders from LendingClub’s December 2014 initial public offering to May 6, 2016, the last trading day before founder and chief executive Renaud Laplanche resigned in the wake of an internal probe uncovering alterations on $3 million of loan applications.
LendingClub specializes in matching borrowers with institutional lenders.
Last week, it also revealed that it sold Leucadia National Corp’s (LUK.N) Jefferies LLC more than $22 million of loans that employees knew did not meet the investment bank’s specifications.
Laplanche and Chief Financial Officer Carrie Dolan are also defendants in the lawsuit.
On Monday, LendingClub said it received a subpoena from the U.S. Department of Justice, and intended to cooperate with the federal probe. It has also identified a material weakness in its internal controls over financial reporting.
The case is Evellard v LendingClub Corp et al, U.S. District Court, Northern District of California, No. 16-02627.
Reporting by Jonathan Stempel in New York