Evolve’s President of Open Banking Division Heads for the Exit
Reflections on Finovate, Trump’s Attempt to Fire Fed Gov Cook Paused (For Now), Qube & Choice Bank's Messy Break Up, Stripe Pushes Back on JPMC 1033 Fee Plan
Hey all, Jason here.
Good morning! This newsletter should be landing in your inbox as I’m midway between New York City and Salt Lake City, where I’m headed to attend back-to-back events for MX and then LoanPro.
If I missed you in New York, hopefully we’re able to connect at another upcoming event this fall.
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Quick Reflections on FinovateFall
I kicked off my fall conference push by attending FinovateFall in New York City last week. This was actually only my second time attending Finovate, and the format was a refreshing change of pace from the typical panel-and-exhibit booth fare — the event still featured panels and booths, of course, but also showcased companies performing brief, seven-minute demoes of their products and services.
It often surprises folks to learn I had never attended fintech- and banking-focused conferences until just a few years ago, when my career shifted more from hands-on operator to analyst, advisor, and consultant.
For the roles I had previously, which focused on customer acquisition and product management across a number of unsecured consumer lenders, there really wasn’t a compelling reason to be on the conference circuit.
But since transitioning from a traditional, single full-time role to my current collection of projects (and living outside of the US), I’ve found participating in industry events like Finovate to be a critical piece of how I engage with others in the industry.
Zoom is great, but reconnecting with industry friends and colleagues in person is always a reminder that virtual meetings are a poor substitute for the real thing.
Finovate was my first but hardly my last stop this conference circuit. When this email lands in your inbox, I should be en route to the Salt Lake City area, to participate in MX’s Money Experience Summit, at which I’ll moderate a session on “How the Right Data Drives Better Consumer and Business Outcomes.”
Following that, I’ll be headed out to the Bonneville Salt Flats to join LoanPro from their Salt Flats Summit. Don’t worry, even if you can’t make it out to the lunar-esque salt flats, you can still catch a live stream of the main session, in which I’ll join LoanPro’s Colton Pond and Fintech Takes’ Alex Johnson to have an unfiltered conversation on what’s really happening in lending.
After the salt flats, it’s back to the Netherlands for some much deserved rest, but don’t worry, I’ll be back in the US soon enough for Money2020, Alex’s Fintech Takes: Builders Summit, American Fintech Council’s Policy Summit, and Fintech NerdCon (see more detail below).
If I’m honest, the pace of events can be a bit taxing, especially while juggling other projects and coming from overseas, but I’m fortunate to be invited and able to attend these industry gatherings. Hopefully, I’ll be able to keep up this pace, at least for a few more conference seasons!
Evolve’s President of Open Banking Division Heads for the Exit
The president of Evolve Bank & Trust’s Open Banking division, which is responsible for the bank’s third-party partnerships and programs, is leaving the embattled bank, multiple sources told Fintech Business Weekly last week.
Hank Word has worked at the bank for more than a decade, including holding roles as senior vice president of technology and systems strategies and as chief technology officer, according to his LinkedIn. Per his profile, in that CTO role, Word was responsible for “organization-wide IT” and operations for the bank and payment processing divisions.
Most recently, Word has served as president of the bank’s problematic Open Banking division, which has been ground zero for the problems stemming from the bank’s numerous, poorly supervised fintech and crypto partnerships.
Problems in the Open Banking division seemingly came to a head with the collapse of Evolve’s third-party technology service provider, BaaS middleware firm Synapse, in April 2024. The situation revealed that as much as $95 million in depositor funds is “missing” — still unaccounted for to this day.
Word has also been linked to alleged technology issues at the bank that may have facilitated illicit activity. As Fintech Business Weekly reported in July 2024, auditors reviewing the bank’s BSA/AML compliance practices discovered Evolve hadn’t properly screened international wire transfers for a period of around seven years, owing to a “coding error” by then-CTO Word.
Former Synapse compliance vice president Sejal Patel has also confirmed that Synapse’s homegrown screening software wasn’t fit for purpose, telling Fintech Business Weekly last July that “[t]he reality was Synapse’s sanctions screening process was home grown and the code didn’t work. Multiple BSA audits revealed the model was broken.”
Bad actors appear to have taken advantage of the glaring gaps in Evolve’s and Synapse’s financial crime controls to carry out various illicit schemes through the bank, with a former Synapse employee referring to what they saw at one Evolve and Synapse program, Juno, as “nightmare fuel.”
Evolve’s inadequate BSA/AML compliance and lack of oversight of its third-party programs led to the St. Louis Federal Reserve and the Arkansas State Banking Department hitting the bank with a wide-reaching enforcement action in June 2024.
And, per Fintech Business Weekly’s exclusive reporting last week, the Federal Bureau of Investigations, the Southern District of New York, and the Money Laundering and Asset Recovery Section of the Department of Justice appear to be continuing to probe Evolve and its third-party partners — not just in relation to the as much as $95 million in missing depositor funds, but also related to transnational money movement through the bank.
It’s unclear what led to Word leaving the bank, though sources tell Fintech Business Weekly he resigned voluntarily. A representative for Evolve declined to comment on personnel matters and did not specify who would led the bank’s fintech business unit once Word departs.
Finra Charges Two Individuals Tied to Synapse’s Brokerage Entity
Finra has charges two individuals associated with Synapse Brokerage LLC over unauthorized account openings and money movement, recent filings reveal.
Finra, a non-governmental regulator that oversees parts of the securities and brokerage industry, filed a complaint against Jeffrey Stanley and Mark Paverman, two individuals associated with Synapse Brokerage LLC, Synapse Financial Technologies’ wholly-owned broker-dealer subsidiary.
The complaint, filed on August 28th, was first reported by Finance Magnates.
The complaint, which is a regulatory disciplinary matter, not a criminal one, alleges the two engaged in misconduct in their oversight and operation of the broker-dealer.
Specifically, the complaint alleges that Stanley:
authorized the opening of brokerage accounts without adequate authorization from customers (eg, on an opt-out basis);
authorized the movement of funds without adequate customer authorization;
allowed Synapse Financial Technologies, a non-Finra member, to perform significant brokerage functions, including ledgering of customer funds;
and failed to reasonably investigate red flags related to reports of discrepancies between Synapse Financial Technologies and the ledger of "DDA Bank 1" (Evolve)
and that Paverman:
caused Synapse Brokerage LLC to fail to preserve required books and records, including email communications and instant message logs;
and represented to Finra that Synapse Brokerage maintained its own books and records and had access to them, when that was not the case.
It’s worth reiterating the above are allegations put forth by Finra and have not been proven as fact.
Finra’s complaint says that the discrepancy between Synapse's ledger and the amount of funds held at “DDA Bank 1,” which appears to be Evolve, is $92 million. This aligns with the total amount former Synapse CEO Sankaet Pathak says was caused by factors that include the Mercury “over migration” and the “Tabapay issue.”
There are a couple notable new items in Finra's complaint, including that FBO accounts at “DDA Bank 1” were retitled around December 2023 as: “Synapse Financial Technologies Synapse [sic] FBO Synapse Brokerage ACH Customers” and “Synapse Financial Technologies Synapse [sic] FBO Synapse Brokerage Wire Customers.”
Perhaps the most intriguing bit is where the complaint describes Synapse Financial Technologies “reallocating” in its ledgers $85 million for “Fintech 1” (Yotta) from the Synapse Brokerage’s program banks (AMG & others) to “DDA Bank 1” (Evolve) and concurrently updating its ledgers for other fintech programs to reflect their funds were held in the Brokerage's program banks, rather than at “DDA Bank 1.”
If true, this implies that an active decision was made to assign Yotta users’ balances to Evolve — which, to date, has refused to say how much it has paid out and what the ultimate short fall is — while assigning other programs’ end users’ funds to the brokerage program banks, which do not appear to have experienced the same kind of shortfall.
Trump’s Attempt to Fire Fed Gov Cook Paused — For Now
President Trump’s effort to fire Federal Reserve Board Governor Lisa Cook hinges on whether or not allegations she improperly declared two homes as her “primary” residence meet the definition of firing for “cause.”
Cook has challenged the firing and sought a temporary injunction that would allow her to remain in her role at the Fed, including voting in Federal Open Market Committee rate meetings, while the case works its way through the courts.
Last Tuesday, a federal judge granted Cook’s request for a temporary restraining order blocking Trump’s attempt to terminate her.
The judge in the case, Jia Cobb, wrote in part that “[t]he public interest in Federal Reserve independence weighs in favor of Cook’s reinstatement,” and continued to say that “[t]hat independence is critical in helping the nation’s ‘banking system to promote stability.’”
However, on Wednesday, the Trump administration said that it intends to appeal the ruling granting a temporary restraining order in the D.C. U.S. Circuit Court of Appeals.
Trump’s attempt to fire Cook appears to be part of a plan to obtain a majority of seats on the Federal Reserve Board of Governors, which could open the door to the more aggressive rate cutting Trump has been advocating for.
During a recent cabinet meeting, Trump said, “We’ll have a majority very shortly,” referring to the Fed board. He continued to say, “So, that’ll be great. Once we have a majority, housing is going to swing, and it’s going to be great.”
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Everything Else: Qube & Choice Bank’s Messy Break Up, Stripe’s Open Banking Comment Letter
Choice Bank’s chaotic breakup with savings & spending app Qube Money is leaving offboarded users in the lurch — and confused & angry.