Zelle Suit Dismissed; Goldman May Bid for Celsius’ Assets; Tapcheck Raises $20Mn

PeerIQ Analytics Platform
6 min readJul 5, 2022

Greetings,

The Fed’s focus is on getting inflation under control, even if that risks a recession. Zelle class-action suit dismissed. FTC sues Walmart over money transfer fraud. EWA platform Tapcheck raises $20Mn. Goldman leading group that may buy Celsius’ assets. FTX and BlockFi announce deal, with option to acquire. NerdWallet acquires On the Barrelhead. Amount lays off 18% of staff. FuturePay partners with Cross River.

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Recession Risk is Worth It

NY Fed President John Williams thinks the glass is half full. In an interview last week, he told CNBC a recession isn’t his base case. Williams described the economy as “strong,” though he acknowledges conditions have tightened. Williams is expected growth to slow compared to last year but believes the economy will avoid recession.

Meanwhile, Fed Chair Powell said the risk of recession is worth it. Powell views the threat of higher inflation becoming entrenched as a bigger threat to the economy than a recession brought on by rate hikes.

Zelle Class-Action Dismissed; FTC Sues Walmart

Peer-to-peer payment apps like Venmo, Cash App, and Zelle have become a favorite tool of fraudsters. Fraud complaints escalated during the pandemic, and legislators and regulators have taken notice. Consumers have taken action too. Luke Hartstock, a Wells Fargo customer, filed suit against the bank. Hartsock, who was scammed out of $7,500, argued the bank failed to protect its customers.

But, last week, the plaintiff filed a notice of voluntary dismissal with the court, withdrawing the suit. No reason was specified. Still, while this suit may be over, as long as consumers continue to get scammed via Zelle, additional suits are a near certainty.

The kinds of fraud perpetrated through peer-to-peer payment apps are nothing new. Last week, the FTC filed suit against Walmart, arguing the retailer “turned a blind eye” to scammers who used Walmart money transfer services to steal hundreds of millions of dollars from consumers. Walmart partners with remittance companies like Western Union, MoneyGram, and Ria to provide the services.

The FTC’s complaint alleges Walmart allowed the payout of suspicious transfers, had no or a poorly enforced anti-fraud policy, failed to provide appropriate disclosures to consumers, and allowed money transfers to be used for telemarketing payments, among other allegations.

Walmart dismissed the accusations as “factually flawed and legally baseless.”

Earned Wage Access Platform Tapcheck Raises $20Mn

Tapcheck, an earned wage access platform, announced it has raised a $20Mn Series A. The company integrates with over 100 payroll systems, including major providers like ADP, Paychex, and Paylocity. Tapcheck uses payroll system data to estimate employees’ accrued earnings net of deductions, which employees can then withdraw in advance of their regular pay date.

The round was led by PeakScan Capital. A valuation was not disclosed.

Goldman Sachs Leading Group To Buy Celsius’ Assets

Goldman Sachs is reportedly putting together a group of investors seeking to raise $2Bn to buy distressed assets from troubled crypto lender Celsius Networks. As of May, Celsius had some $12Bn worth assets under management and had lent clients more than $8Bn worth of crypto.

But after the collapse of the Terra stablecoin and with crypto prices cratering, Celsius abruptly froze users’ accounts on June 12, citing “extreme market conditions.”

Celsius has brought on a number of firms to advise on its options, which potentially include a restructuring, sale, or bankruptcy. Regardless of the specific outcome, Celsius’ (and similar firms’) failure is likely to result in loss of customer funds. This is almost certain to invite additional regulatory scrutiny the sector would prefer to avoid.

FTX Inks Deal with BlockFi

FTX, led by young crypto billionaire Sam Bankman-Fried, is serving as a sort of lender of last resort for the crypto ecosystem. It previously extended a $250Mn credit line to BlockFi. Alameda Research, also founded by Bankman-Fried, extended a $500Mn loan to Voyager Digital to help it “safeguard client assets.” Both BlockFi and Voyager had exposure to crypto hedge fund Three Arrows Capital, which has become insolvent and reportedly will be liquidated.

Thursday, FTX was reportedly in discussions to acquire troubled crypto lender BlockFi for $25Mn in a fire sale. However, CEO Zac Prince disputed the claim on Twitter, stating “I can 100% confirm that we aren’t being sold for $25Mn.” Friday, BlockFi cleared up rumors, announcing a deal with FTX that included a $400Mn revolving credit facility and the option for FTX to acquire BlockFi “at a variable price of up to $240 million based on performance triggers.”

It wouldn’t be the only equity stake Bankman-Fried ended up owning. Alameda acquired a $35Mn stake in Voyager last month. And Bankman-Fried personally took a 7.6% stake in publicly traded Robinhood for $648Mn.

NerdWallet to Acquire On the Barrelhead

Financial advice site NerdWallet is acquiring product recommendation engine On the Barrelhead. The deal values On the Barrelhead at about $120Mn.

On the Barrelhead pairs customer credit information with financial partner data to make personalized credit recommendations. The company’s assets will be fully integrated into NerdWallet’s existing brand and tech stack.

The move seems designed to help NerdWallet compete with CreditKarma, which has long offered “approval odds” and recommended specific products.

Amount To Layoff 18% of Staff

Banking software company Amount, which was spun off from online lender Avant, is the latest fintech to announce layoffs. To date, Amount has raised $243Mn in equity, including a $99Mn round last year that valued the company at just over $1Bn.

Now, citing the “current macroeconomic environment,” the company is cutting 18% of its workforce. Amount CEO Adam Hughes described the move as a “proactive” one, designed to better position the company for a potential downturn.

Amount’s layoff news signals that pain in the fintech sector isn’t confined to consumer-facing companies like crypto exchanges and BNPL providers. Now, more enterprise- and software-oriented companies are also preparing for the worst.

FuturePay Partners with Cross River

FuturePay, a provider of digital revolving credit solutions, announced it is partnering with Cross River. Cross River will help power FuturePay’s MyTab™ credit product. MyTab is an embedded lending solution available to e-commerce merchants and their end customers. Unlike BNPL, MyTab’s revolving product allows merchants to build long-term relationships with their customers.

“We are excited to partner with FuturePay to power its new digital revolving credit platform. This innovative product helps to fill a gap in the market and provide responsible credit solutions to more consumers,” said Adam Goller, Head of Fintech Banking at Cross River.

In the News:

Are Banks Holding Too Much Capital … Or Too Little? (American Banker, 6/26/2022) Officials argue over balancing the right level of safety with the economic benefit of allowing banks to lend out more funds.

Robinhood Shares Jump 14% on Report FTX May be Exploring a Deal (CNBC, 6/27/2022) Robinhood’s stock was briefly halted, but FTX’s CEO denies the report.

FTX CEO Sam Bankman-Fried says ‘no active M&A conversations with Robinhood’ (MarketWatch, 6/27/2022) SBF said he was excited about Robinhood business prospects and potential future partnerships, although he denied the report about M&A from Bloomberg.

Are Cash Discounts the Answer to Merchants’ Intensified Swipe-Fee Pain? (American Banker, 6/24/2022) While some merchants are offering discounts to consumers that pay with cash, most consumers do not carry very much, if any, cash, complicating efforts.

Spire Partners with Mastercard to Simplify Digital Banking (Finextra, 6/24/2022) Spire’s “Ingage” is an AI-driven financial wellbeing platform for retail customers.

How Apple Will Boost The Apple Card With Buy Now Pay Later (Forbes, 6/28/2022) Apple hopes to address weaknesses in its merchant-facing proposition through its “Breakout” initiative.

Marqeta Expands its Credit Platform (The Paypers, 6/28/2022) Marqeta adds a new dashboard and more than 40 credit APIs.

Joust Founder Launches Fintech with a Twist on Credit Building (American Banker, 6/28/2022) StellarFi pays customers’ bills and collects the money through their linked bank accounts, helping them build credit.

Revolut Appoints Chief Banking Officer as US CEO (altif, 6/30/2022) Sid Jajodia is taking on the additional responsibility to roll out the company’s international banking operations.

Lighter Fare:

Mesmerizing Half-Wheel Bike Shows Two Halves Make a Whole — and This Applies to Physics Too (ZME Science, 6/28/2022) Engineer “reinvents” the wheel in fun experiment.

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PeerIQ Analytics Platform

PeerIQ, a Cross River company, offers online Software as-a-Service risk analytics for owners and operators of consumer credit risk.