Five fintech companies faced legal issues in 2023, including fraud, false promises, and internal conflicts among founders.
Key Points:
- The breakdown of JPMorgan’s relationship with Frank, a college financial-planning website it acquired in 2021, was a significant legal case. JPMorgan alleged that Frank concocted millions of fake user accounts.
- A neobank for the LGBTQ community, Daylight, folded in June following lawsuits alleging discrimination, fraud, and false data feeding to investors.
- Greenwood Financial, a banking app for Black and Latino customers, resolved a dispute with The Gathering Spot, a network of private clubs it acquired in 2022.
- Totem, a neobank for Native Americans, experienced a feud between its co-founders as it launched its consumer accounts publicly. Lawsuits were filed alleging broken promises and intellectual property theft.
- The Federal Trade Commission (FTC) imposed an $18 million penalty against Brigit, a consumer finance app, for misleading customers about cash advance amounts and burdening them with subscription plans difficult to cancel.
The breakdown of JPMorgan’s relationship with Frank, a college financial-planning website it acquired in 2021, was a significant legal case in the fintech industry in 2023. JPMorgan alleged that Frank concocted millions of fake user accounts. This legal dispute highlighted the need for thorough due diligence in financial institutions acquiring fintech companies. The fallout between JPMorgan and Frank demonstrated the importance of conducting extensive due diligence to avoid dealing with significant fallout post-merger.
Daylight, a neobank for the LGBTQ community, faced lawsuits alleging discrimination, fraud, and false data feeding to investors. The company ceased operations in June, attributing the closure to its failure to scale amid a rising interest rate environment.
Greenwood Financial, a banking app for Black and Latino customers, resolved a dispute with The Gathering Spot, a network of private clubs it acquired in 2022. Despite the dispute, the companies agreed to retain a commercial partnership agreement to ensure access to each other’s services.
Totem, a neobank for Native Americans, experienced a feud between its co-founders as the company launched its consumer accounts publicly. Lawsuits were filed by the chief technology officer against Totem Technologies and its founder and CEO, alleging broken promises and intellectual property theft. The co-founders engaged in a legal battle, with both sides making claims and counterclaims about contractual obligations and misconduct.
The FTC imposed an $18 million penalty against Brigit, a consumer finance app, for misleading customers about cash advance amounts and subscription plans. The FTC’s action against Brigit is part of a wider trend of regulatory scrutiny on nontraditional credit providers.
