Fraud, false promises and clashes between founders were some of the troubles that sent fintech companies into legal turmoil in 2023. The most prominent case was the breakdown of JPMorgan's relationship with Frank, the college financial-planning website it acquired in 2021 that reportedly concocted millions of fake users. Several other neobanks and finance apps ran into bumps — albeit with fewer headlines — after colleagues brought lawsuits or a government agency levied fines.
The fallout between JPMorgan Chase and Frank is one that struck Nate Viebrock, counsel at Bradley Arant Boult Cummings, as resonant this year.
"We represented a few banks that ran into some issues with the business practices of a fintech post-merger," he said. That included situations where a business-to-business fintech's clients would have raised red flags for the bank if it had conducted a more thorough due diligence. He recalls one case where a bank purchased a fintech before one of the fintech's major customers went bankrupt. Viebrock hopes to see heightened due diligence among financial institutions buying fintechs going forward, "so they are not dealing with extensive fallout once the deal is done and can't unwind it," he said.
Here is a look back at five legal cases involving fintechs that American Banker covered in 2023.
