Middleware Platform Solid To Wind Down, Lewis & Clark To Exit BaaS
Evolve & Its Execs's History of Illegal Discrimination, Breaching Fiduciary Duty; Wise Reaches $2.5M CFPB Settlement; Chopra Says Goodbye
Hey all, Jason here.
As I mentioned last week on X and LinkedIn, I’m looking to make somewhere between 6-12 angel investments this year, depending on the quality of dealflow, check size, etc. — most likely in banking- and fintech-related fields, as this is where I’m best positioned to add value on the cap table.
If you’re building in the space, please feel free to get in touch!
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!Evolve & Its Execs's History of Illegal Discrimination, Breaching Fiduciary Duty
While, without question, the Synapse bankruptcy, with as much as $96 million in missing depositor funds, is the highest-profile case Evolve is linked to, it’s hardly the first legal challenge the bank and the family behind it has faced.
Before Bryan Scot Lenoir, who goes by his middle name, acquired First State Bank around 2004 and subsequently renamed it, he served as President and CEO of Memphis-based First Mercantile Trust Company, a profit-sharing and 401(k) plan administrator started by his father, Kenneth “Kenny” Lenoir.
First Mercantile was originally known as Lenoir & Associates, which the elder Lenoir founded in 1972. First Mercantile was acquired by National Commerce Financial Corp. in 2000 and subsequently was absorbed by SunTrust, which merged with BB&T in 2019 to become Truist.
An examination of legal and regulatory actions against First Mercantile and its affiliates and successors, Evolve Bank & Trust, and Scot and Kenneth Lenoir personally reveals a troubling pattern of breaching fiduciary duties and illegal discrimination.
Semmes-Murphy: A Retirement Plan Alleges It Was Missold Risky Interest Rate Derivatives
Nearly thirty years ago, in March 1995, the Semmes-Murphy clinic, a medical practice in Memphis, filed a civil suit against Investment Advisors Incorporated (IAI), an investment manager, Morgan Keegan & Company, an investment advisor, and affiliated individuals.
A year later, in May 1996, IAI and affiliated individuals filed a third-party complaint in the case, naming First Mercantile Trust Company and Kenneth Lenoir as third-party defendants.
According to the motion to bring them into the case as third-party defendants, in January 1994, First Mercantile and Kenneth Lenoir took over administration and management duties for Semmes-Murphy’s assets and thus assumed accompanying federal and state law duties stemming from their role as plan administrator. Scot Lenoir worked alongside his father at First Mercantile, holding the title president and CEO by the time he left the company.
In March 1998, Semmes-Murphy, the plaintiff in the original filing, added First Mercantile as a defendant in its second amended complaint.
Semmes-Murphy’s agreement with IAI gave it complete discretionary authority to buy and sell assets on behalf of the investment plans without prior approval or consultation, within the constraints of the plans’ documents and investment guidelines. In line with those guidelines, IAI agreed to manage the plans’ fixed-income portfolios “prudently and conservatively… for the sole purpose of providing retirement security to the plans’ participants.”
Semmes-Murphy’s agreement with IAI specifically designated IAI as a fiduciary as defined in the Employment Retirement Income Security Act (ERISA).
Yet, despite the plan documents, investment guidelines, and federal and state law to the contrary, IAI invested the plans’ funds into highly risky “inverse floating derivative securities,” Semmes-Murphy’s complaint says. Known as “inverse floaters,” they are a type of leveraged bet on the movement of a benchmark interest rate and can be highly volatile.
Morgan Keegan, the investment advisor that brought on IAI to manage the funds, received commissions and other remuneration tied to the inverse floaters, Semmes-Murphy’s complaint says.
According to the complaint, beginning in 1992, IAI “began a systematic, intentional, and deceptive program of purchasing Invest Floaters with the assets of the Plans,” which was “directly contrary to the Plans’ investment guidelines, contrary to the Plans’ documents, and contrary to Investment Advisors’ fiduciary responsibilities under ERISA and under state law.”
IAI continued “its systematic, intentional, and deceptive purchases of the risky Inverse Floaters, in ever increasing amounts, from March, 1992, until the last purchase on or about February 28, 1994,” two months after First Mercantile took over administration of the plans, the complaint states.
At that point, the inverse floaters comprised more than 51% of the conservative growth fixed income portion of the plans’ portfolio, according to the complaint.
By April 1994, four months after First Mercantile had taken over administration of the plans, the inverse floaters, which IAI had spent about $3.8 million (not adjusted for inflation) to acquire, lost more than 41% of their value in a single month.
When Semmes-Murphy expressed concern about the significant drop in value, IAI and Morgan Keegan claimed that “the drop in value was simply a temporary pricing aberration and that the value of the Inverse Floaters would be quickly restored if the Plans continued to hold [them],” the complaint says.
Ultimately, the plans lost in excess of $2.2 million as a result, equivalent to about $4.8 million today.
Semmes-Murphy’s complaint alleged breaches of fiduciary duty, violations of the SEC Act, fraud and fraudulent misrepresentation, breach of contract, and negligence and sought actual and punitive damages.
The case was ultimately dismissed on in September 1998, pursuant to a settlement agreement. Terms of the settlement couldn’t immediately be discerned.
2,300 Retirement Plans Allege First Mercantile, Lenoirs Secretly Charged Unauthorized Fees
The 1995 Semmes-Murphy case isn’t the only time First Mercantile or the Lenoirs were accused of breaching their fiduciary duties.
In 2002, local Memphis staple Corky’s Bar-B-Que filed a putative class action suit against First Mercantile, the National Bank of Commerce, National Commerce Financial Corporation, Kenneth Lenoir, and Scot Lenoir, alleging violations of the Employee Retirement Income Security Act (ERISA) and the Racketeer Influenced and Corrupt Organizations Act (RICO).
The suit alleged that First Mercantile and the other defendants overcharged the approximately 2,300 retirement plans with over 100,000 individual participants that comprise the class and sought restitution of $775 million in losses the plans sustained over a four year period, repayment of the overcharges, and punitive damages.
Specifically, filings in the suit allege that, beginning as early as January 1998, First Mercantile, Kenneth Lenoir, and Scot Lenoir “embarked upon a plan dramatically to increase the fee income generated from the assets under FMT’s management so as to enrich themselves and, ultimately, to attract a financial institution that would purchase or acquire FMT at a substantial premium, making Defendants [Kenneth] Lenoir and [Scot] Lenoir and their affiliates multi-millionaires.”
In 2000, National Commerce Financial Corporation, the parent company of the National Bank of Commerce, acquired Kenneth Lenoir’s First Mercantile for $35 million.
First Mercantile and the Lenoirs allegedly carried out this scheme by developing and distributing marketing materials and contracts that purported to describe the fee structure, but “secretly [charging] the unauthorized and undisclosed fees and expenses to the plans and otherwise [making] unauthorized withdrawals of plan assets.”
This was no mistake, the plaintiffs allege: according to reporting on the case at the time, “An investment analyst discovered the high fees by accessing a secret database on his computer at FMT and alerted Lenoir, who did nothing.” The plaintiffs argue that the defendants actively attempted “to suppress information concerning the true fees FMT deducted from plan assets.”
According to the suit, in early 2002, some of the plaintiffs began making inquiries regarding the accuracy of fee disclosures.
Defendants First Mercantile and Kenneth and Scot Lenoir made verbal statements to these plaintiffs assuring them of the accuracy of the fee schedule and, in October 2002, sent a letter claiming that unspecified client information and agreements were out of date and asking the plan administrators to approve an updated “Agency and Participation Agreement,” filings in the suit say.
The agreement included a clause, “buried at the end of the agreement,” which would have the plans “‘approve, ratify and confirm all actions heretofore taken by FMT or otherwise relating to the assessment and collection of fees and charges, including Trustee Fees, directly or indirectly, against plan assets,’” which, the suit argues, was an attempt to have the plaintiffs “unwittingly surrender their legal claims that could be brought due to many years of unauthorized and excessive fees.”
Corky’s, the Bar-B-Que restaurant that was the named plaintiff, abruptly withdrew from the case in January 2003 “amidst allegations of a campaign by the Defendants to intimate Plaintiffs.”
Despite Corky’s withdrawal from the case, subsequently captioned Farm & Indust. Sup, et al v. First Mercantile Tr., et al, Corky’s counsel continued to represent the remaining plaintiffs and reached a tentative settlement, which was announced publicly in April 2003.
However, not all members of the class were happy with the proposed settlement, with a subset of plaintiffs seeking to set aside the certification of the class, arguing that the settlement offer may have been “the product of pressure and communication from Defendants similar to what was brought to bear against Corky’s,” which allegedly caused the restaurant to withdraw from the case.
The settlement was reached “before any responsive pleading, before class certification, and without any formal discovery,” which, the group argued, “raise[d] questions about how vigorously and zealously Plaintiffs negotiated… with respect to the interests of the class as a whole.”
Ultimately, the case was settled for $10.7 million in cash and $7.3 million in future fee reductions; of that amount, plaintiffs’ attorneys were awarded about $5.1 million in fees and expenses. The settlement cost National Commerce Financial, parent company to First Mercantile, about $0.07 per share.
The day after the settlement was publicly announced, Scot Lenoir sent an internal communication to consultants that reiterated the company “obviously” felt the terms of the settlement were fair to its customers and that First Mercantile remained “stronger… than ever.”
The same day saw a nearly 20% dip in First Mercantile’s parent company’s stock price, erasing about $700 million of its market capitalization, according to reporting at the time.
Around the time of the settlement, both Kenneth and Scot Lenoir left their positions at First Mercantile, with Kenneth going on to start his own trust company, Kenneth Lenoir Trustee, and Scot working to found what would become Evolve Bank & Trust.
Evolve Hit With DOJ Case For Illegally Discriminating Against Disabled Borrowers
The string of legal issues continued as the Lenoirs built and grew Evolve Bank & Trust.
According to reporting at the time, around 2004, Scot Lenoir raised about $9 million from 28 investors to start what would become Evolve Bank & Trust, by acquiring and renaming First State Bank. The tiny Arkansas bank, just across the river from Memphis, Tennessee, had a bit over $100 million in assets and net income of just $645,000 as of year end 2003.
The company initially planned to focus on brokerage and investment services and, over time, expanded into mortgage lending, retail banking, and trust services.
In early 2006, the younger Lenoir even brought on his father, Kenneth, to run the trust division, which handles aspects of administering employee benefit plans.
A profile the same year in the Memphis Business Journal referenced Scot Lenoir and bank CEO W. Scott Stafford as describing the strategy as “not a bank on every corner… but rather a few select ‘financial centers’ that will focus on high net worth individuals.”
Despite its goal of building out a mortgage lending business, Evolve failed to develop the necessary fair lending training and compliance controls, based on allegations contained in two Department of Justice actions against the bank for illegal discrimination.
The first case, according to a complaint filed in US District Court in Western Tennessee in early 2016, alleged that Evolve illegally discriminated against persons who derived income from Social Security Disability Insurance (SSDI), in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA).
Per the complaint, “From at least January 1, 2008, until March 29, 2013, it was the policy and practice of Evolve to require some borrowers with a disability to document the continuation of SSDI income or other disability income by providing a letter from a doctor or other information about the borrower’s disability.”
Yet the bank didn’t ask applicants with wage or salary income to document that such income would continue.
Again according to the complaint, in some cases, if a disabled applicant was unable to obtain or refused to provide such a letter, Evolve denied the mortgage application.
The Department of Justice’s suit alleged that these practices constituted illegal discrimination on the basis of disability and on the basis of receipt of public assistance, a pattern of “resistance” to applicants’ full enjoyment of rights secured by the Fair Housing Act, and a pattern or practice of violating the Equal Credit Opportunity Act.
The matter was ultimately settled when Evolve entered into a consent order with the Department of Justice.
While, in the settlement agreement, Evolve continued to deny the allegations and continued to claim it had treated loan applicants fairly, the bank agreed to make certain payments to impacted applicants and “to adopt and maintain revised policies with regard to disability income, and provide training to its employees to ensure that mortgage applicants with a disability are treated in a manner that does not discriminate on the basis of disability or receipt of public assistance, consistent with the requirements of the FHA and the ECOA.”
The consent order further required Evolve to provide equal credit opportunity training for management officials and employees involved in taking applications for, underwriting, originating, or pricing loans for residential real estate.
Commenting on the settlement at the time, then-Federal Reserve Governor Lael Brainard said, “Illegal discrimination on the basis of disability is unacceptable. This settlement not only provides restitution for mortgage applicants that were harmed by the bank’s discriminatory practices, but ensures that the bank institutes new, fair policies and trains its staff to implement them.”
Evolve Overcharged Employee Stock Purchase Plan By $6.5 Million, Judge Found
The Department of Justice isn’t the only federal agency to take issue with Evolve’s business practices.
In 2016, the Department of Labor filed a complaint against Adam Vinoskey, Sentry Equipment Erectors, Inc., Evolve Bank & Trust, and related parties, stemming from a 2010 Employee Stock Ownership Plan (ESOP) transaction.
Sentry, which produces industrial equipment such as conveyors and bottling machines for soft drink makers, had established the ESOP in 1993. As Adam Vinoskey and his wife, Carole Vinoskey, approached retirement age, they intended to transfer their 100% ownership of the company over time to the ESOP, according to court filings in the case.
In 2004, the Vinoskeys sold 48% of their stock in Sentry to the ESOP at a price of $220 per share, for a total sale price of almost $9 million.
The ESOP conducted annual appraisals of the stock of the privately held company, in order to facilitate departing employees selling their shares back to the ESOP, should they desire to do so.
From 2007 to 2011, the appraisals reflected share prices ranging from $241 to $285.
In or around 2010, the Vinoskeys decided to sell their remaining 52% stake to the ESOP.
Bill Gust, an attorney at Gentry Locke representing the ESOP, reached out to Evolve on November 9, 2010, asking if the bank could “could squeeze another deal in Dec” and floating a deal value of “approx $21 million,” though with no explanation of how he arrived at that valuation.
Evolve executive vice president and head of the bank’s trust department, Kenneth Lenoir, was, at the time, primarily responsible for Evolve’s trust business and worked on the Sentry ESOP deal, alongside bank employees Michael New, senior trust officer, and C. Douglas Kelso, executive vice president of operations.
Lenoir, New, and Kelso also represent three out of four members of Evolve’s ESOP advisory committee, “which ostensibly ‘provide[d] an independent review of all proposed ESOP transactions involving the purchase or sale of the sponsor’s stock.’”
Evolve hired CAI, the firm that had conducted prior stock valuations, and Gentry Locke, the ESOP’s attorney, to assist with aspects of the transaction.
According to the judge’s 100-page memorandum opinion in the case, a significant part of the motivation to close the deal, on which work began only in mid-November 2010, by the end of the year was for the significant tax savings that would accrue to the company if it was 100% owned by the tax-exempt ESOP entity.
On or around December 11, 2010, Evolve’s Lenoir and New reviewed CAI’s draft appraisal and raised several issues with it, including that it had no forecasts of Sentry’s future performance, no “sensitivity report,” and assumed half of healthcare costs would be shifted to employees, despite Vinoskey unequivocally objecting to the change.
Lenoir and New also noted that CAI’s appraisal conducted an asset-based approach to valuation, but gave no weight to it, in favor of relying only on an income-based approach; they also noted CAI did not conduct a discounted cash flow analysis, which CAI viewed as “inappropriate for ESOP valuations.”
CAI’s analysis also assumed the ESOP, once it had 100% ownership, would hold a “controlling interest” in the company.
Despite their concerns about CAI’s valuation methodology, on December 15, 2010, Kenneth Lenoir and Evolve, in its role as fiduciary for the ESOP, made an offer of $406 per share, an aggregate purchase price of $20.7 million, to acquire the Vinoskey’s remaining 52% of Sentry.
Though Evolve’s role as fiduciary was to represent the best interests of the ESOP — not the Vinoskeys — Lenoir “admitted at trial that Evolve made no attempts to negotiate a lower price” and “that his goal was to secure a deal that was fair to both Adam Vinoskey and the Sentry ESOP.”
Ultimately, Evolve made the $20.7 million offer, and Adam Vinoskey accepted it, before the final appraisal report had even been prepared and delivered.
Indeed, the transaction had closed on December 20 and Evolve had already resigned as the independent trustee to the ESOP when CAI’s updated appraisal was shared with Evolve.
And while CAI’s appraisal assumed the ESOP would have a controlling interest in the company, the judge’s opinion also noted that, though the ESOP would come to own 100% of Sentry after the transaction closed, the Vinoskey’s would still functionally control the company.
Even after the 2010 transaction, Adam and Carole Vinoskey remained as two of the three trustees of the ESOP, giving them the ability to unilaterally vote the ESOP’s shares, including to elect the company’s board directors.
Adam Vinoskey remained as Chairman of the board of Sentry, and Carole remained as Secretary — functionally giving the couple near-total control of the company, even though they no longer owned any of it.
As the judge’s opinion explains:
If the ESOP wanted to remove Adam and Carole Vinoskey as ESOP Trustees, the ESOP would have to petition the Secretary (Carole Vinoskey) to call a special meeting of the Board of Directors, a body that, absent changes, would have been elected by Adam and Carole Vinoskey as ESOP Trustees and that, absent changes, would have included Adam and Carole Vinoskey as two out of three Directors.
In 2011, Adam Vinoskey used this control to cause Sentry to purchase the corporate form of Florida company Sen-Pack — of which Vinoskey himself was the owner — without taking any input from or allowing a vote by ESOP participants.
The Department of Labor’s complaint argued that Evolve and Vinoskey’s actions constituted a prohibited sale and a breach of fiduciary duties in violation of ERISA.
Ultimately, the judge in the case found Evolve, Adam Vinoskey, and a trust Vinoskey used to hold shares in the company jointly and severally liable for the amount the ESOP overpaid, which the court calculated to be $6,502,500.00.
A Department of Labor press release on the outcome noted:
In its 100-page decision, the court explained that as a fiduciary to the ESOP, Evolve Bank failed to notice, question or investigate several red flags that appeared in the appraisal of the stock that was used to set the $406 per share price. By failing to investigate these red flags adequately, Evolve Bank failed to live up to the stringent duties of loyalty and prudence imposed by ERISA. The court also held that Vinoskey violated ERISA when he accepted a $406 per share price at a time when he knew, or should have known, that Sentry’s stock was worth less than that price.
Vinoskey successfully appealed the judgment, and, in early 2022, two of the three counts were reversed and the judgment was lowered to about $1.9 million.
In a strange twist, just three days after the amended final judgment, Sentry filed a suit against Evolve, seeking to recoup more than $1.6 million the company had advanced to Evolve in attorneys’ fees, expert fees, and related expenses Evolve incurred during the Department of Labor case.
Sentry’s case against Evolve argued that it wasn’t obligated to indemnify Evolve for damages arising directly from a breach of Evolve’s fiduciary obligations under ERISA, which, Sentry said, meant Evolve was required to repay the amounts it sought.
Sentry further alleged that, despite an agreement between Sentry and Evolve that the bank would not enter a settlement in the DOL litigation without providing notice to Sentry, that Evolve did exactly that: “While the appeal was pending, upon information and belief, Evolve entered into a settlement agreement with the Secretary, whereby Evolve settled all claims by the Secretary related to the Transaction. Sentry was not given an opportunity to consent to or reject the settlement and has not received a copy of the settlement agreement.”
Sentry alleged Evolve violated ERISA and breached its contract; Sentry further sought a declaratory judgment from the court that Sentry had no obligation to indemnify Evolve for costs incurred in the DOL litigation. Evolve, in turn, made various allegations and counterclaims against both Sentry and the ESOP in the case.
Ultimately, the case was dismissed in late 2022 after the parties reached a settlement. Terms of the settlement couldn’t immediately be confirmed.
Evolve Illegally Discriminated Against Black, Hispanic, Individual Female Borrowers, Department of Justice Says
Despite the Department of Justice beginning to investigate its fair lending practices in 2014 and the 2016 order and the remediation and fair lending training it required, Evolve allegedly continued to illegally discriminate against borrowers.
In fact, over a ten year time span, the Federal Reserve, Evolve’s primary federal regulator, made three referrals to the Department of Justice, “each time after finding reason to believe that Evolve discriminated in its mortgage loan business and engaged in violations of the FHA and/or ECOA.”
One of those referrals resulted in the Department of Justice filing another suit against the bank in 2022, alleging that, from at least 2014 through 2019, Evolve implemented policies and practices that resulted in Black, Hispanic, and female borrowers paying more in the so-called “discretionary” pricing component of residential mortgages compared to white or male borrowers.
According to the suit, “‘Discretionary pricing’ refers to the broad discretion in the initial interest rate selection, as well as fees, charges or discounts, among other costs, that Evolve loan officers had discretion to add to or subtract from the risk-based price of the loan; these components were unrelated to a borrower’s creditworthiness or the characteristics of the loan.”
Despite being on notice of the fair lending risk its mortgage lending operation posed, Evolve’s policies allowed “broad discretion to select artificially high rates and provide discounts and concessions without internal control systems to monitor that discretion.”
According to the complaint, Evolve gave its mortgage origination offices abnormally wide discretion to select rates, did not provide any guidance or standards on how to apply concessions, did not require any documentation or justification for concessions offered, and did not exercise oversight or approval of concessions.
Despite originating mortgages for more than a decade, Evolve did not have a fair lending program or a fair lending officer until February 2020, the complaint says.
The impact of Evolve’s allegedly illegal discrimination was that Black, Hispanic, and individual female borrowers paid higher rates that couldn’t be explained by other factors, the Department of Justice’s complaint says.
The DOJ’s analysis found that Black borrowers paid 13 to 19 basis points more in discretionary pricing than white borrowers; Hispanic borrowers paid 18 to 25 basis points more than white borrowers; and individual female borrowers paid 14 to 21 basis points more than individual male borrowers.
Per the complaint, “The statistical disparities in discretionary pricing described above cannot be explained by factors unrelated to the borrowers’ race, sex, or national origin.”
The DOJ found that Evolve’s “policies and practices have caused significant economic harm and resulted in Black and Hispanic borrowers paying more for home loans than similarly-situated white borrowers, and in female borrowers paying more for their home loans than similarly-situated male borrowers.”
The complaint alleges that Evolve’s pattern of illegal discrimination constituted violations of the Fair Housing Act and the Equal Credit Opportunity Act.
The case was ultimately settled in October 2022, with Evolve entering into a consent order, paying $1.3 million to compensate impacted borrowers, and paying a $50,000 civil money penalty.
The consent order also required Evolve to maintain a fair lending committee and fair lending officer, establish a mortgage lending pricing policy that minimizes fair lending risk, maintain a consistent recordkeeping system across all office for residential mortgage loans, and provide equal credit opportunity training to all management officials, mortgage loan officers, and other relevant employees.
At the time, US Attorney for the Western District of Tennessee Kevin G. Ritz commented on the settlement, saying, “This settlement will provide deserved relief to thousands of borrowers who suffered discrimination due to Evolve Bank’s pricing policies. This case marks the Justice Department’s latest step to protect Americans from illegal lending practices, and shows that we will hold lenders accountable for the effects of their discriminatory practices.”
Asked why stakeholders in the Synapse bankruptcy — end users, the trustee, government officials — should believe Evolve and its leadership are engaging honestly and in good faith, given the history of failure to meet fiduciary obligations and of illegal discrimination, representatives for Evolve declined to comment.
Have a tip about Evolve Bank & Trust, Scot or Kenneth Lenoir, or other Evolve employees? Let me know by responding to this email or reach me on secure messaging app Signal at: +1-316-512-1571Evolve’s Profit Plunges Nearly 60%, New Filing Shows
Evolve’s most recent report of condition and income, filed last week for the fourth quarter of 2024, shows the bank’s net income has plunged nearly 60% vs. 2023.
Higher rates helped drive both Evolve’s interest income and interest expense higher, with net interest income rising about $5.6 million, or about 20%, year over year.
However, Evolve saw non-interest income, where much of its fintech-related revenue would fall, drop by about $12.8 million, or 10.7%, year over year.
Meanwhile, non-interest expenses ballooned, jumping 16.3%, or $17.5 million, as the bank responds to ongoing fallout from the Synapse bankruptcy, the Russia-linked ransomware attack, and the wide-reaching consent order it entered into with the Federal Reserve last year.
The upshot is that Evolve’s net income declined from about $24.7 million in 2023 to just shy of $10.3 million in 2024. Evolve remains well-capitalized, with a leverage ratio of 10.04%, a tier 1 capital ratio of 15.17%, and a total capital ratio of 16.43%.
Evolve did have one piece of good news last week: its fair lending officer, John Werkhoven, whom it sent to California to defend against former customer Carolyn Ryan’s motion to vacate in small claims court, prevailed.
The court ruled in Evolve’s favor and denied Ryan’s motion to set aside the judgment that determined Evolve owed the undergrad student nothing.
Scot Lenoir and Kenneth Lenoir did not respond to multiple inquiries and requests for comment as of the time of publication.
Solid Shutting Down, Lewis & Clark To Exit BaaS, As Bank-Fintech Reckoning Continues
Troubled middleware platform Solid is shutting down, multiple credible sources familiar with matter tell Fintech Business Weekly, as its only known bank partner, Lewis & Clark, seeks to wind down its banking-as-a-service business.
Solid, founded in 2018, had raised a total of $80.7 million in equity, though the company was sued by FTV, which led its Series B round, over allegations Solid fraudulently inflated its revenue.
The case was ultimately settled, with Solid buying back FTV’s stake — albeit at a hefty 56% discount.
Lewis & Clark, a $370 million asset bank based in Oregon, appears to be Solid’s only current bank partner.
Solid had previously partnered with troubled Evolve Bank & Trust, though the two parted ways as Evolve's problems mounted in 2023.
Solid and Evolve face at least two open civil cases related to alleged fraud perpetrated through Solid’s platform. During its partnership with Evolve, Solid memorably facilitated the launch of “anonymous” crypto debit card ZELF, seemingly without Evolve’s knowledge or authorization.
But now, multiple sources with knowledge of the matter tell Fintech Business Wekly, Lewis & Clark is exiting the BaaS space altogether, including its relationship with Solid.
The 48-employee bank posted a $1.9 million net loss in 2023, suggesting it may lack the resources to run a BaaS program in a responsible and compliant manner, though the bank swung to a modest $417,000 profit in 2024, its just released call report shows.
Programs Solid and Lewis & Clark appear to currently support, according to Solid’s website and a review of relevant terms and conditions, include Paystand, Zenoti, Struxtion, Multikrd, Loop, and Sendola.
Representatives for Solid and Lewis & Clark did not respond to multiple inquiries and request for comment.
Wise To Pay $2.5 Million In CFPB Consent Order
Remittance provider Wise, once known as TransferWise, reached a consent order with the Consumer Financial Protection Bureau.
The CFPB alleges Wise advertised inaccurate fees and failed to properly disclose exchange rates and other costs. When remittances users sent did not arrive on time, Wise failed to refund fees in the timeframe required by law, the bureau alleges.
In one example of how Wise marketed ATM access and fees, the CFPB writes (spacing adjusted and emphasis added):
Wise sent multiple emails and blogs to its customers around the globe announcing lower ATM fees, free withdrawals, and other customer perks. Wise led customers in the U.S. to believe these perks applied to them, when they, in fact, did not.
For instance, Wise said 80% of customers would pay lower ATM fees, however, few, if any, of those customers were U.S.-based.
Likewise, U.S.-based customers were led to believe they would receive two free withdrawals of slightly more than $200 each. In reality, they only received two free withdrawals up to $100 each.
The CFPB alleges that Wise violated the Consumer Financial Protection Act’s prohibition on unfair, deceptive, and abusive practices and Regulation E’s prepaid card rule and remittance rule.
Under the consent order, Wise will pay approximately $450,000 to impacted users and pay a $2.025 million civil penalty.
Time’s Up For Chopra at the CFPB
News broke on Saturday that Director Chopra’s time leading the Consumer Financial Protection Bureau has come to an end, some 12 days after President Trump was sworn in for his second term. Despite the change in administration, Chopra had remained active, making public appearances and continuing to advance rulemakings and enforcement actions.
Trump had promised to fire Chopra on “day one,” leading to increasingly loud questions about why he was still leading the bureau, which has long been a target of conservative lawmakers.
With Chopra’s departure, the bureau’s deputy director, Zixta Martinez, will step into the role of acting Director — though her time in the role is likely to be limited.
It’s widely believed that Trump has waited this long to fire Chopra because, absent another Senate-confirmed person to lead the agency in an acting capacity, the role defaults to the next in charge at the agency: Martinez.
Sources tell Fintech Business Weekly once Trump’s Office of Management and Budget nominee, Russ Vought, is confirmed, he is likely to also be named as acting Director of the CFPB, until Trump nominates a permanent director and that person goes through the confirmation process.
New Senate Banking Committee chair Tim Scott (R-NC) has teased that a nomination is “imminent” and that “conservatives will be happy.”
In a resignation letter to Trump also released publicly on X, Chopra attempted to plant the seeds for issues he hopes may appeal to Trump and the next CFPB Director (spacing adjusted and mphasis added):
“This letter confirms that my term as CFPB Director has concluded. I know the CFPB is ready to work with you and the next confirmed Director, and we have devoted a great deal of energy to ensure continued success.
For example, we have proposed rules to block China, Russia, and other countries of concern from conducting surveillance operations on Americans using commercial data brokers.
We have also put forth policies to block financial firms and technology giants from debanking and deplatforming Americans based on their speech or religious views, while also restoring freedom and other individual rights.
The next CFPB Director will also be able to act on the evidence we have already uncovered in law enforcement investigations of Big Tech and Wall Street firms.
We have also analyzed your promising proposal on capping credit card interest rates, and we see a path for enacting meaningful reforms.”
Chopra was arguably the bureau’s most polarizing leader in its approximately 15-year history: some saw him as a fearless crusader seeking to protect consumers, while others saw him as a partisan ideologue with an axe to grind, and some thought his priorities, like an unrelenting focus on “big tech,” were misplaced altogether.
While I will refrain from offering my own thoughts on Chopra’s respective successes and failures, asked the question, ChatGPT surfaced the following highlights:
Consumer protection: Chopra’s CFPB secured billions of dollars in relief for consumers who were treated unfairly by financial institutions
Enforcement actions: The bureau took significant actions against major banks and financial companies, including:
Fining U.S. Bank $37.5 million for illegally accessing customer credit reports and opening unauthorized accounts5.
Penalizing Wells Fargo $3.7 billion for widespread mismanagement and illegal activities.
Requiring Regents Bank to pay $191 million for illegal surprise overdraft fees.
New regulations: The CFPB issued several new rules to protect consumers, including:
Limiting excessive bank overdraft fees.
Giving consumers greater control over their financial data.
Capping credit card late fees.
Banning medical debt from appearing on credit reports.
Focus on “junk fees”: Chopra waged a campaign against what he termed "junk fees" across the economy.
Student loan advocacy: He brought enforcement actions against student loan market leaders and predatory schools.
And the following lowlights:
Overreach accusations: Financial industry opponents often argued that Chopra overstepped his bounds.
Legal challenges: Some of Chopra’s initiatives, such as limits on overdraft and credit card late fees, faced lawsuits from industry opponents.
Political controversy: Chopra’s aggressive approach made him a target for conservatives and led to calls for his removal.
Regulatory burden: Critics argued that his policies placed excessive regulatory burdens on financial institutions.
Other Good Reads
Is BNPL Better for Consumers Than Credit Cards? (Fintech Takes)
How To Assign a Dollar Amount to Cyber Risk (FinXTech)
What’s Going On in Banking 2025 (Cornerstone Research)
Open Letter to Incoming Banking Regulators: Proposed Measures to Improve the Bank Charter Application Process (Michele Alt)
About Fintech Business Weekly
Looking to work with me in any of the following areas? Email me.
Now available: buy my best-selling book, Banking as a Service: Opportunities, Challenges and Risks of New Banking Business Models, here
Vendor, partner & investment opportunity advice and due diligence
Fintech advising & consulting
Sponsoring this newsletter
News tip or story suggestion — reach me on Signal at +1-316-512-1571