Evolve Bank and Trust has agreed to a cease-and-desist order with the Federal Reserve after it “found that Evolve engaged in unsafe and unsound banking practices” surrounding some of its fintech partnerships.
Furthermore, the Federal Reserve found that Evolve did not have “controls sufficient to comply with anti-money laundering laws.”
Evolve has been thrust into the banking industry spotlight recently as many fintech users have had their accounts frozen due to the failure of Synapse Financial Technologies, the middleman that connected Evolve to these various fintechs.
The problem has grown in complexity as the ledgers of Synapse and Evolve, and even some of the fintechs like Yotta, disagree on how much money is meant to be in certain accounts.
Evolve has been an important bank for the crypto ecosystem, serving as the card issuer for BlockFi’s credit cards and providing checking accounts and debit cards for FTX customers.
The recent examiner report in the FTX bankruptcy court also highlighted that FTX Philanthropy had approximately $10 million in accounts at Evolve Bank and Trust.
Alleged scammers who operated ‘pig-butchering’ scams also used Evolve Bank, with Protos reporting on a US Secret Service affidavit in support of seizure.
Today’s cease and desist order will require Evolve to submit more detailed plans to the regulators in order to show it is complying with applicable laws, including internal controls and money laundering controls. Furthermore, the bank is required to submit an updated due diligence program that explains how it ensures it has adequate information on its customers.