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NEW YORK (TheStreet) --  Bloomberg Businessweek's Max Chafkin appeared on BloombergTV's "Bloomberg Markets" on Tuesday afternoon to talk about LendingClub's (LC)  problematic past and where the company goes from here. 

The online marketplace company that connects borrowers and investors came under fire earlier this year because the management team had been taking out loans between 2007 and 2009 to strengthen the company's brand in the public's eyes, Chafkin said. 

Chafkin said a few weeks before LendingClub confirmed this story, he had received an e-mail from someone saying that they had a conspiracy theory that LendingClub had been doing just that based on his data science investigation of the company. The source had seen loans that looked questionable, as though a CEO or someone close to the CEO was taking them out, Chafkin said. 

Of course, this news "cast doubt over the company's business practices" and "makes the larger story seem problematic," Chafkin pointed out.

As for what this story means for peer-to-peer lending as a whole, Chafkin says, "It's hard to know."

While having the option to get a loan through the Internet makes sense, "we don't know how good this business is because we haven't gone through an actual recession with any of these companies, and I think that will be the biggest test," Chakfin explained. 

Currently, LendingClub is trying to move past this criticism by doing audits, hiring a new CEO, and trying to raise more capital, Chafkin said. However, because the company's goal is to disrupt the banking industry, a lot of their capital comes from hedge funds and "flighty" investors, both of which are not as reliable as banks, he pointed out. 

The company is trying to convince investors that it is "sustainable," and it still has a chance, Chafkin said. 

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"It's not like this business is going to go away anytime soon. It's just that this business may have grown too fast," he concluded. 

Shares of Lending Club were lower in late-afternoon trading on Tuesday. 

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

TheStreet Ratings team rates LendingClub as a Sell with a ratings score of D-. This is driven by multiple weaknesses, which the team believes should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks the team covers.

You can view the full analysis from the report here: LC

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