A number of LendingClub’s largest investors have halted purchases of its loans, the company said in a quarterly filing this week, after an internal company probe found it had falsified documentation when selling a $22 million package of loans to an investor, which sources have said is Jefferies.

Since then, LendingClub has tapped Jefferies to reach out to new potential investors to sell loans directly, including alternative asset managers such as Apollo Global Management, Fortress Investment Group and J.C. Flowers & Co, the people said this week.

It was not clear which investors will participate in the latest effort. Apollo, Fortress and J.C. Flowers declined to comment. Jefferies also declined to comment.

U.S. bank Citigroup told U.S. regulators last week that it had rebuffed a request from Jefferies to support LendingClub, according to a May 12 memo seen by IFR, a member of the Thomson Reuters group. Citigroup declined to comment.

In a statement, LendingClub said it had been approached by a number of existing and potential new investors about large purchases of loans.

“We respect and understand our partners’ needs to conduct due diligence, are engaged in constant, productive discussions, and are encouraged by the progress,” the company said.

“These are complex discussions that by their nature will take some time to complete. Meanwhile, our platform continues to operate with existing investors and more returning each day.”

It is likely that investors who do agree to participate will demand a discount for buying the loans, some sources said.

Investors who buy large quantities of loans will be offered warrants that give them shares in LendingClub, some of the people said.

LendingClub is not currently seeking to raise any equity or debt financing, sources said. The sources asked not to be identified because the matter is confidential.

LendingClub has $900 million in cash and a $120 million line of credit, the company said.

THE PENDULUM HAS SWUNG

Hailed as a “fintech” rival to traditional banks in the wake of the financial crisis, peer-to-peer lenders like LendingClub enjoyed rapid loan growth and attracted plenty of investor dollars through their promise to provide quick and cheap unsecured personal loans online.

LendingClub, the first peer-to-peer or marketplace lender to go public in late 2014 with a market value of $9 billion, was the biggest name in the sector. Founder and CEO Renauld Laplanche was its public face.

Laplanche resigned after the internal probe into documentation backing $22 million of loans. He declined to comment for this story.

Shares in the San Francisco-based company (LC) have dropped 45% since his departure, leaving it with a market value of $1.4 billion.

The U.S. Department of Justice has launched an investigation into the events leading up to Laplanche’s departure and the New York state’s financial regulator is investigating the business practices of LendingClub, including the interest rates it charges consumers and its relationships with banks.

Even before the current controversy, institutional investors, which account for the bulk of the industry’s funding, had pared investments in loans from such marketplace lenders.

Blackrock, the world’s largest money manager, turned its back on the sector in August because it was unhappy with the disclosures it was getting on loans from Prosper, the No 2 player after Lending Club, a source familiar with the situation said.

Blackrock also felt that the returns from the loans were not as attractive as more established asset classes, the source said.

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In a statement Prosper said it continued to give its loan buyers the same level of information at the time of loan purchase as it always has done.

“We’ve also enhanced our data services to provide more loan-level transparency for Prosper investors,” Prosper said.

A Federal Reserve interest rate rise in December sparked concern about how peer-to-peer lenders would cope with rising default rates. These companies have yet to be tested through a full credit cycle.

Some investors also were spooked by the revelation that Prosper, the No 2 marketplace lender, had made a $28,500 loan to one of the people involved in a mass shooting in San Bernardino last year.

Some platforms have looked in new directions to raise funding. Student and personal loan platform SoFi and near-prime lender Avant both launched funds to invest in their own loans.

“It was a sellers’ market, two years ago. And these platforms had significant power to dictate selling terms,” said Jon Barlow, a board member of P2P commercial mortgage startup Money360 and former CEO of Eaglewood Capital Management, one of the first institutional firms to securitize Lending Club loans.

“The pendulum, I think, will shift back to the buyer.”