Shares of LendingClub plummeted 35 percent Monday after the company said founder Renaud Laplanche had resigned as chairman and CEO.
Laplanche's departure comes as LendingClub acknowledged it conducted an internal review of its business practices. The investigation also led to the firing or resignation of three senior managers.
The company's executive leadership said the review of loans discovered staff knowingly sold $22 million in loans in March and April 2016 that did not meet the buyer's requirements. It came after an unnamed staffer made a change executives described as "minor" to internal loan paperwork.
The company did not identify the investor to which the $22 million in loans were sold; however, executives said Monday morning the loans were bought back from the investor at par, and re-sold elsewhere. The review revealed loans extended to one investor did not conform with company policies, the company said in a statement.
With Laplanche's departure, President Scott Sanborn will be acting CEO, while Hans Morris will assume the newly created role of executive chairman. Morris, who has been a LendingClub director since 2013, also sits on the company's audit and risk committees.
"We are truly and very clearly saddened by his departure," Morris said of Laplanche Monday morning, adding later, "This is not something the board will compromise on."
Laplanche co-founded LendingClub in 2006.
Before Monday's trading session, Lending Club shares had fallen more than 50 percent in the past six months and about 36 percent in 2016.
LC in past 6 months
"Speaking for the whole board, we're confident in Scott [Sanborn] and [CFO] Carrie [Dolan]," Morris said on the company's earnings conference call Monday morning, where the executive reshuffling was also discussed.
The company said it would bolster internal controls after the sale of what it called $22 million in "near-prime" loans, and also revealed it would suspend providing the market guidance.
"This is a very isolated event," Dolan told an analyst on LendingClub's call. "We take this very seriously."
— Reuters contributed to this report.
Correction: This story has been updated to reflect LendingClub was founded in 2006.