Solid Financial files for bankruptcy after pig butchering scandal

Embedded finance platform provider Solid Financial Technologies filed for bankruptcy this week, less than a month after victims of an alleged pig butchering scheme filed a class action lawsuit seeking to recover $28 million in funds from a fraudster who had kept roughly $5.3 million in funds with Solid.

Solid's bankruptcy filing, first reported by Jason Mikula, indicated the company had roughly $10.5 million in assets and $4.1 million in liabilities as of Feb. 28. A large portion of the company's assets — $9.6 million — is in bank accounts, though the bankruptcy filing does not detail how much is customer funds rather than Solid's own funds.

The alleged fraudsters are companies using a variety of names including UAB Qbit Financial Services, QbitPay, Bytechip and others. All are allegedly operated by Yujun Wu (also known as Michael Wu), a Chinese national living in California, according to court records filed by U.S. attorneys.

Wu's companies allegedly engaged in wire fraud and money laundering, according to a class action lawsuit complaint filed in March and filings by the U.S. attorneys. According to the class action lawsuit filed against Qbit, the company lured victims into making progressively larger deposits into cryptocurrency wallets, then blocked the victims from accessing these accounts and stole the money, a scheme also known as pig butchering.

Michael Mashkevich, the man who filed the class action lawsuit against Qbit, said he lost approximately $90,000 to the scheme after Qbit representatives lured him into making initial deposits and then increasingly larger transfers, according to the lawsuit he filed. His complaint estimates that Qbit defrauded thousands of victims out of an estimated $28 million.

Solid provides banking-as-a-service infrastructure to other fintechs looking for API-driven banking. The fintech also worked with banks including Evolve Bank and Trust and Lewis and Clark Bank.

Money laundering allegedly ran through Solid accounts

Prior to Solid filing for bankruptcy this week, the fintech had been in a legal dispute involving the alleged fraudsters and Evolve Bank. That dispute started in earnest in January 2023, when Solid began terminating Qbit-related accounts at the behest of Evolve due to "unusual ACH activity," according to an email Solid sent to Qbit representatives.

Qbit and Gatcha Pictures, a company that U.S. attorneys alleged to be laundering Qbit's pig butchering proceeds, ultimately settled with Solid, Evolve and the U.S. in August by admitting no fault but agreeing to return $2.4 million to Evolve and Solid and forfeit $1.9 million to the U.S. 

Bytechip and Gatcha had complained during the forfeiture process that Solid had breached its contract by failing to enable fund transfers and terminating the agreement without proper cause.

Solid, in turn, argued that it was complying with the directions of their partner bank, Evolve, which was itself cooperating with the federal investigation. The agreement between Solid and Bytechip allowed Solid to suspend services if there was a perceived financial, reputational, legal, regulatory or security risk, according to Solid.

Evolve has faced its own troubles

In the past year, Evolve has found itself in the middle of other high-profile controversies connected to its fintech partnerships and cybercrime.

Most recently, the bank settled a class action lawsuit by plaintiffs representing approximately 18 million victims of a 2024 data breach at the bank. The settlement will cost the bank $11.9 million. The data breach that led to the settlement occurred between February and May 2024 and involved names, dates of birth, Social Security numbers, driver's license numbers and contact information.

Prior to that, the bank was embroiled in the bankruptcy of its former banking-as-a-service middleware provider, Synapse. Former FDIC Chair Jelena McWilliams, who is the Synapse bankruptcy trustee, identified a $65 million to $95 million shortfall between the amount of money the fintech said was in end users' accounts and the amount its bank partners — Evolve, American Bank, AMG National Trust and Lineage Bank — said was in those accounts.