Working for an investment firm, you want people to take their hard-earned money and just throw it away, right? Of course not.
But that’s essentially what’s happening when companies mislead their investors. Getting investments under false pretenses is unfair and fraudulent. Companies that participate in this kind of fraud need to be held accountable for their actions. Employees like you can play a crucial role in exposing this kind of fraud and protecting innocent investors from unnecessarily losing their money with the help of whistleblower programs.
Executives who spearhead fraud, or willingly let it happen around them, should bear most of the responsibilities for their companies’ wrong-doings. There’s a false misconception that once an executive is no longer with a company, they can be exonerated from wrong-doings that took place during that time.
Former executives can — and should — still be held accountable for their actions. In two very recent cases, that’s exactly what happened. Let’s take a closer look at those two cases.
In September 2018, the SEC charged LendingClub Asset Management LLC and its former president Renaud Laplanche, along with parent company LendingClub Corporation’s former CFO Carrie Dolan, with improper use of investment fund money. There were two main complaints against LCA and Laplanche:
- Breach of fiduciary duty by using funds managed by LCA to benefit its parent company rather than the fund.
- Improper adjustments of monthly returns for funds to improve investor report numbers.
In both of these instances, Laplanche and LCA were misleading investors and not acting in their best interest. They failed to present a transparent, straightforward report of performance, so investors were denied their right to make informed investment decisions. As a result, the three were ordered to pay more than $4.2 million in combined penalties.
Another major instance of misleading investors came to light in April 2019. From July 2015 to May 2017, Prosper Funding LLC reported overstated annualized net returns to more than 30,000 investors via emails and website information. Many investors were misled by those inflated numbers and made additional investments under false pretenses. The order also states that Prosper failed to correct their error despite being aware of the miscalculation of the net returns. As a result, Prosper paid a $3 million penalty.
What these cases both have in common is that former executives purposefully misled investors. With inaccurate information, many investors made the decision to make investments that they may not have made if they had the correct information. This is a serious case of fraud, and even executives who are no longer at the company need to be held accountable.
Unfortunately, fraud involving misleading investors continues to happen today. It’s important for potential whistleblowers to know that it’s never too late to report financial fraud or wrongdoing, even if the person responsible is no longer part of the company at fault. While it may seem intimidating to report an executive at your company, it’s important for keeping investors protected while holding organizations (and the individuals in charge) accountable for their actions.
Anti-retaliation laws exist for this reason; so brave employees like you can come forward to honestly report instances of fraud without fear. Since it’s a complex process, it’s best to do so with the guidance of whistleblower experts, like the team at the DJO Whistleblower Law Group.