"Anonymous" Crypto Debit Card Startup Sues BaaS Platform, Ex-Evolve Partner Solid
Will The Real CashScore® Please Stand Up, Christmas Came Early For These Fintechs
Hey all, Jason here.
A quick programming note: this will be the last newsletter for 2024. I’ll be heading to Mexico for the holidays, with regular programming resuming on Sunday, January 5th, 2025.
I’m looking forward to some downtime over the holidays, but that doesn’t mean I’m not already thinking about next year. See details on my next installment of Taktile’s Expert Talks series, focused on emerging SMB threats and scams, which will take place on January 22nd (more info below.)
If you enjoy reading this newsletter each Sunday and find value in it, please consider supporting me (and finhealth non-profits!) by signing up for a paid subscription. It wouldn’t be possible to do what I do without the support of readers like you!Is Your Organization Prepared For The Latest SMB-Related Fraud & Scam Threats?
Fraud and scams aren’t just a consumer problem.
In fact, the risk and the dollar amounts in play when businesses are involved can be orders of magnitude higher than consumer fraud and scams. Yet, the robustness of data and tooling to help banks and fintechs combat SMB fraud and scams often lag what’s available for consumer use cases.
In this installment of Taktile Expert Talks, we’ll bring together industry experts Jonathan Awad, cofounder and CEO of Baselayer, Chris Tremont, chief digital officer of Grasshopper Bank, and Anchit Singh, chief business officer of Fundbox, to discuss emerging threats in the space and how their organizations are staying ahead of them.
Start your 2025 off right by getting up-to-date on the latest threats facing small and medium-sized businesses and the financial institutions that serve them.
Christmas Came Early For These Fintechs
‘Tis the season for miracles, and a number of fintechs have plenty of reason to celebrate, with numerous companies reporting new funding or dealmaking activity in recent weeks:
Current: the neobank, which partners with Choice Bank and Cross River to offer banking and credit products, announced it has raised a total of more than $200 million in new funding — its first publicly-known fundraise since the heady days of 2021, at which time the company was valued at $2.2 billion.
Current’s fundraise consisted of $30 million in equity, which came from existing investors Andreessen Horowitz, Wellington Management, and Avenir; a $100 million warehouse line, from Cross River; and $75 million in non-dilutive financing, from General Catalyst, which the company plans to use to support its marketing efforts.
Cofounder and CEO Stuart Sopp told Axios that the company is on track to post more than a 90% increase in revenue for 2025 compared to last year, reaching a number in the “hundreds of millions.” Sopp expects the company to achieve profitability in Q3 or Q4 next year. And, while an IPO isn’t in the cards for 2025, Current aims for “IPO readiness” sometime in 2026 or 2027, Sopp said.
One: things at One have been relatively quiet, but that seems to be because the Walmart- and Ribbit Capital-backed neobank and earned wage access startup has been heads down, building and scaling the business. The current iteration of One was formed through the acquisition of two firms, a neobank (which was branded as One at the time it was acquired) and earned wage access service Even Financial.
Now, the company is raising more than $300 million from Walmart and Ribbit, in a transaction that values the company at $2.5 billion, Bloomberg reports. According to the report, One now has more than 3 million monthly active users and has achieved an annualized revenue run rate of more than $200 million. One is widely expected to begin issuing Walmart’s cobranded credit card sometime next year. Walmart sued its previous cobrand partner, Capital One, arguing that Capital One had breached the terms of its agreement; the companies announced the end of their partnership in May 2024.
Jiko: the company, which acquired Mid-Central National Bank in 2020, announced it has raised a $29 million Series C. The round was led by existing investors Upfront Ventures, with participation from Radicale Impact, Red River West, Airbus Ventures, and other undisclosed investors. Jiko also owns a registered broker-dealer, which it leverages to facilitate its “Pockets” offering. Pockets, according to the company, combine the safety and yield of US government-backed T-bills with the transactional capabilities of a bank account.
LendAPI: the startup describes itself as the “Wix for fintech,” which, it says, enables its customers to “launch any financial product in minutes.” The company announced a $3.2 million seed round of financing, led by Cohen Circle, with participation from AlleyCorp, Techstars, Plug and Play, Great North Ventures, and Interlock Capital. LendAPI’s capabilities include its Product Studio, Rules Studio, Pricing Engine, and Integration Marketplace.
Upvest: investing infrastructure provider Upvest announced it has raised a €100 million Series C. The round was led by Hedosophia, with participation from Sapphire Ventures, Bessemer Venture Partners, BlackRock, HV Capital, Earlybird, Notion Capital, and Motive Ventures. Berlin-based Upvest enables other firms to offer embedded investing capabilities, including ETFs, fractional shares, and mutual funds, with plans to add derivatives, bonds, and ELTIFs in the near future. Upvest’s customer base includes firms like Revolut, Raisin, N26, and bunq.
MoneyLion: neobank and small-dollar lender MoneyLion announced an agreement to be acquired by Gen Digital, a Czech Republic-based company that owns and operates a number of antivirus and personal data security brands.
Gen will pay $82 per share, or about $1 billion in cash, plus an additional contingent payment, if Gen's average volume-weighted average share price reaches at least $37.50 per share over 30 consecutive trading days from December 10, 2024 until 24 months after close. The deal values MoneyLion at about 9-11x NTM EBITDA, according to the investor presentation.
While the $82 per share purchase price is substantially above MoneyLion’s 52-week low of $36.65, it’s substantially below the $297 per share it began trading at after SPAC’ing (adjusted for 30-to-1 reverse split).
Brigit: small-dollar lender and credit building app Brigit has also been acquired, the company announced last week. Upbound Group, which offers “technology-driven financial solutions to customers underserved by the traditional financial system,” agreed to acquire Brigit in a deal worth as much as $460 million.
Upbound will pay $325 million at closing, 75% cash and 25% equity, $75 million in deferred compensation over a two-year period, and up to a $60 million earn out, contingent on Brigit hitting certain performance metrics in 2026.
According to the announcement, Brigit boasts nearly two million monthly active users, is profitable, and is expected to be accretive to Upbound’s EBITDA by $25 million - $35 million in 2025.
Will The Real CashScore® Please Stand Up
The bizarre tale of TomoCredit continues.
The company originally began as a crypto play, before pivoting to offering a “no FICO score” charge card targeting groups with limited credit history, like students and recent immigrants.
Tomo “paused” its charge card offering after repeatedly defaulting on its Silicon Valley Bank-provided debt facility, including by misappropriating funds, SVB alleged in a lawsuit first reported on this October by Fintech Business Weekly. Despite describing the decision as a “pause,” Tomo has never resumed issuing credit or charge cards.
Tomo pivoted to a credit builder offering, TomoBoost, which charged users hefty monthly fees of up to $130 per month to furnish seemingly entirely fabricated tradeline data. Despite facing repeated criticism for the dubious offering, Tomo still appears to be actively marketing it to users, even after Equifax, Experian, and TransUnion cut off the company’s ability to furnish data in October (an earlier version incorrectly suggested Tomo may have shut down its TomoBoost offering.)
The company has also faced numerous lawsuits for not paying its bills, including a card fulfillment vendor, which sued Tomo for more than $700,000, and a former employee who sued the company and its cofounder and CEO personally for failing to pay a settlement stemming from claims of sexual harassment and retaliation for reporting illegal business practices.
Earlier this year, the company purported to launch a cash flow-based credit score it claims to have developed to underwrite applicants for its charge card product, which Tomo described at the time as “a proven method for assessing and acquiring mid- to high-income borrowers.”
Now, Tomo is facing allegations of trademark infringement, with Prism Data, which also offers a cash flow-based credit score, alleging not only that Tomo has used its protected mark, “CashScore,” but that the company went so far as to fabricate blog posts in an effort to make it look like Tomo had been using the term since as early as 2018.
Only, according to Prism Data’s lawsuit, filed last week in US District Court in Southern California, Tomo’s ruse was poorly executed and easily detected.
For one, Tomo wasn’t even founded until 2019 — a year after Tomo claimed to first use the CashScore mark, according to Prism’s suit.
Per Prism’s filings in the case, “[a]fter extensive searching, the only instances Prism could find of Tomo—or anyone, including more-established competitors of Prism—using “CashScore” or “Cash Score” were Tomo’s uses in June 2024,” which prompted Prism to send Tomo a demand to cease and desist.
Tomo responded, six weeks later, with links to a number of blog and social media posts that, Prism argues, had been crudely edited to retroactively insert the “CashScore” term, in order to give the false impression Tomo had been using the mark since 2019.
While the versions of the posts Prism contemporaneously reviewed contained the mark, historic versions captured by the Internet Archive’s Wayback Machine do not, Prism’s suit says.
A review of Tomo’s website shows that, though some pages that included the “CashScore” term appear to have been removed, as of the time of publication, multiple examples remain, which purport to have been published in 2019 and 2020.
Prism Data’s suit argues that Tomo’s actions constitute trademark infringement and unfair competition and seeks an injunction that would enjoin Tomo from using the mark, damages and profits attributable to Tomo’s infringement, restitution, and costs.
“Anonymous” Crypto Debit Card Startup Sues BaaS Platform, Ex-Evolve Bank & Trust Partner Solid
Just over two years ago, “anonymous” crypto debit card startup ZELF was abruptly shut down by its banking partner, Evolve Bank & Trust, after a marketing launch on Product Hunt went viral — both among users interested in the product but, unfortunately for ZELF, among the fintech and banking industry as well.
Now, ZELF is suing the banking-as-a-service partner it worked with on the offering, Solid, in Delaware state court.
This isn’t the first legal challenge Solid has faced; Solid was sued by one of its own investors, FTV, which alleged the company committed fraud by artificially inflating its revenue numbers that it used to support its Series B fundraise. The matter was ultimately settled, with Solid buying back its own shares from FTV — at a hefty 56% discount.
Solid also faces multiple legal challenges relating to one of its clients, EZBanc, stemming from allegations EZBanc utilized capabilities provided by Solid and its underlying bank partner, Evolve, to defraud multiple companies of approximately $9 million.
In a bizarre twist, one of the firms involved, China-linked Bytechip, is suing Solid and Evolve after the US Secret Service froze more than $5 million the company held at Evolve as, the US government filings say, the funds are the proceeds of various frauds, including crypto “pig butchering” scams.
In the latest lawsuit, filed in September, ZELF alleges that Solid tricked it into working with the company by promising features and capabilities that would support ZELF’s use case of issuing anonymous crypto debit cards in a compliant manner — only, ZELF’s suit says, Solid was never really capable of doing this.
According to ZELF’s suit:
Solid represented—orally and in writing—that it could allow Zelf to offer legally compliant banking and cryptocurrency services to Zelf’s customers based on the customers providing only their name and a verified telephone number. In actuality, Solid could not provide those services. And Solid knew at the time (or must have known) that it could not provide those services.
Solid’s actions, the suit argues, were part of its scheme to defraud its Series B investors by inflating its revenue metrics: “Solid’s acts to fraudulently induce Zelf to become and remain a Solid client were components of a larger scheme by Solid to defraud its investors. Solid wanted to inflate its financials to attract a Series B round investor and to do so, it embarked upon a pattern of saying anything to land new clients, like Zelf.”
ZELF already had an operating business at the time it began working with Solid. According to its suit, it had launched in Europe via BaaS platform Treezor, a subsidiary of Société Générale, which had initially promised ZELF it would be able to operate across the entire EU.
But, the suit says, shortly after beginning to issue cards in 2020, Treezor informed the company it would need a distinct BIN range for each country it planned to operate in, forcing ZELF to launch on a country-by-country basis.
ZELF ultimately launched its anonymous card in Spain and France and, by the end of 2021, claims it had approximately 570,000 cardholders.
But given Treezor’s geographic and feature limitations, ZELF began evaluating US BaaS providers, when a Solid representative, unsolicited, reached out to the company, the suit says.
After the negative experience with Treezor, ZELF sought to ensure Solid could actually deliver the services it promised; per the lawsuit, (emphasis added throughout) “[Solid cofounder and President] Mr. Lal stated unequivocally during the February 7, 2022 call that Solid was able to provide Zelf with anonymous cards and accounts, and he elaborated on at least one of the ways Solid could accomplish it correctly from a compliance standpoint,” and Lal didn’t express that Solid would have any issue supporting crypto trading.
However, in reality, “Solid could not provide compliant anonymous card services and Mr. Lal (and others at Solid) knew or should have known that Solid could not provide those services, setting Zelf on a course towards catastrophe,” ZELF’s lawsuit alleges.
ZELF ultimately agreed to work with Solid in early 2022, but, the suit says, “cracks in Solid’s façade began to show” as ZELF worked to build out its product offering.
ZELF did begin issuing anonymous card accounts on Evolve via Solid in July 2022, which required users to supply only a first and last name, which were not verified, and a phone number.
On December 8th, 2022, ZELF undertook its ill-fated promotion on Product Hunt and, later the same day, found that it could no longer issue cards. This wasn’t a technical issue, as ZELF first thought, according to the suit, but rather Solid unilaterally suspending its program without warning.
Solid’s bank partner, Evolve, demanded the termination, after first learning of the existence of ZELF’s anonymous card program after the Product Hunt launch, according to ZELF’s suit: “Zelf later learned that Solid had opened Zelf users’ anonymous cards without Evolve’s knowledge or authorization.”
Two other Solid/Evolve programs, Clearing Tech Inc. and Kyshi, were shutdown around the same time for similar reasons, according to the suit.
The abrupt shutdown left ZELF’s users — more than 29,000 anonymous accounts that had been opened at Evolve Bank & Trust, apparently without the bank’s knowledge, via Solid — unable to access or reclaim their funds, the suit says.
Solid’s letter to ZELF terminating its program stated that balances could only be returned to users once they passed a “proper KYC review,” the company’s lawsuit says. Given the logistical challenges, the suit says that, “[u]ltimately, Zelf and Solid determined that the only viable solution for returning funds to individual Zelf users was to transfer all of the funds to Zelf to have Zelf administer distributions to individual users.”
ZELF alleges that Solid’s actions constitute fraud and breach of contract, and the company is seeking actual, compensatory, and punitive damages plus costs, expenses, and attorneys’ fees.
For its part, Solid filed a motion to dismiss ZELF’s suit on November 26th, arguing ZELF failed to state a valid claim. As of now, the matter remains pending.
Banking as a Service: The Wait Is Almost Over
American readers, good news: the wait is nearly over.
My book, Banking as a Service: Opportunities, Challenges and Risks of New Banking Business Models, officially publishes in the US on December 31st (so, if you were looking for New Year’s Eve plans, look no further!)
If you purchase it directly from the publisher, enjoy free shipping and 20% off with the promo code BAASISLAND. It’s also available on Amazon, including the Kindle ebook edition.
Advance praise for Banking as a Service:
Jesse Silverman, counsel at Troutman Pepper, says, “I’ve spent almost 25 years as a regulator and lawyer in consumer finance and fintech, and there have been few people who have the breadth of understanding of the industry like Jason does… Jason has been on the ground in fintech and covering some of the brightest and darkest parts of the BaaS industry for years, so it’s fantastic to see all of that knowledge brought together in one book. If I were building in the space right now, this would be the first book I bought, but it’s a must read for all the rest of us who work with and for BaaS providers.”
Alex Johnson, founder of Fintech Takes, says, “Jason’s experience as an operator in fintech and banking, combined with his incredible reporting on the banking-as-a-service space over the last few years makes him the best person to write the definitive book on the past, present, and future of BaaS. He’s done just that.”
Michele Alt, cofounder of Klaros Group, says, “Jason Mikula is one of my favorite sources of fintech news and analysis for three reasons. First, he has his finger on the industry’s pulse and is often first with breaking news. Second, Jason stays with the story after it breaks, chasing down additional developments and exploring all the angles. Third, he really understands and is able to explain the complex regulatory framework in which fintechs operate. This all adds up to Jason being a must-read for me and other industry professionals.”
Other Good Reads
CFPB's Google Fight Threatens Power to Designate Risky Companies (Bloomberg Law)
The Consumer Bureau Is Likely Here to Stay, but Big Changes Await (New York Times)
One Last Shot At Data Brokers (Fintech Takes)
Executive Summary of the Overdraft Lending: Very Large Financial Institutions Rule (CFPB)
Dual Perimeters: US Payments Policy Needs Federal and State Balance (Alex Barrage/Open Banker)
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