Synapse Financial Technologies Inc. Photographer: Pavlo Gonchar/SOPA Images/LightRocket/Getty Images
Evolve Bank & Trust has appointed Robert Hartheimer as its new CEO, effective immediately, a move that comes during a tumultuous period for the Memphis, Tennessee-based institution. The bank is currently addressing a June 2024 cease-and-desist order from the Federal Reserve and the fallout from a significant financial mishap involving its fintech partner, Synapse.
The bank’s troubles began when Synapse, a banking-as-a-service middleware firm, filed for Chapter 11 bankruptcy in April 2024. This event exposed a discrepancy of between $65 million and $95 million in customer funds that had not been adequately tracked, leading to multiple lawsuits against Evolve, including accusations from fintech customer Yotta of mismanagement and operating a Ponzi scheme.
Sarah Bloom Raskin, former Federal Reserve Board governor and current professor at Duke Law School, noted that Hartheimer’s extensive experience positions him uniquely to guide Evolve through these challenges. She highlighted his previous role at the FDIC, where he managed the resolution of troubled banks, as indicative of his capability to implement necessary reforms at Evolve.
Hartheimer’s primary objective will be to restore both compliance and reputation following the Synapse collapse. “It is definitely a challenge,” Raskin stated. “But if there’s anybody who can do it, it’s someone with Bob Hartheimer’s experience.”
Addressing the Aftermath of Synapse
Evolve’s difficulties stem from its relationship with Synapse, which had provided a shared ledger for tracking transactions between Evolve and its fintech partners. Following Synapse’s bankruptcy, a significant shortfall was discovered, prompting investigations and legal actions. Evolve has since moved most of its Synapse customer accounts to three other partner banks—Lineage Bank, AMG National Trust, and American Bank—asserting that there was no shortfall in customer funds at the time of the transfer.
The Consumer Financial Protection Bureau (CFPB) has indicated plans to hold Synapse accountable for the missing funds, which may involve using its Civil Penalty Fund to reimburse affected customers. Hartheimer defended Evolve’s actions, stating, “We have been a Boy Scout in the Synapse matter,” and emphasized that the bank has invested millions to reconstruct records in light of the discrepancies.
He acknowledged the broader implications of the Synapse situation, which he described as a wake-up call for all banking-as-a-service institutions. “New ways of doing things occur, and then there’s a catch up on how those businesses need to be managed and overseen,” he remarked.
Future Plans and Regulatory Compliance
Under Hartheimer’s leadership, Evolve is actively working to address the issues cited in the Federal Reserve’s cease-and-desist order, which outlines deficiencies in areas such as compliance with anti-money laundering laws and consumer risk management. The bank has initiated projects focused on data management and transaction monitoring to meet regulatory standards.
Hartheimer, who became a consultant to Evolve’s board prior to his appointment as CEO, expressed optimism about the bank’s potential. “The Evolve CEO job is a great challenge,” he said. “It really encapsulates everything I’ve done for the last 25 years or so in the world of banking and regulation.”
Board Chairman Steve Valentine expressed confidence in Hartheimer’s ability to navigate Evolve’s challenges, stating, “Bob was selected for his unmatched corporate experience in strategically navigating challenges at financial institutions.” He emphasized the board’s commitment to restoring trust and transparency within the organization.
Although there are rumors suggesting that Evolve might be prepared for a sale, Hartheimer clarified that the bank possesses over 10% capital and ample liquidity. “This is not a bank that is forced to do anything,” he asserted. Hartheimer aims to enhance Evolve’s standing across all its business lines, including its trust, mortgage, and regional lending operations.
As Evolve continues to work through its current challenges, Hartheimer remains focused on steering the bank toward a brighter future, underscoring the importance of rebuilding customer trust and regulatory relationships. With a dedicated team and a commitment to innovation, Evolve aspires to emerge as a leader in technology for fintech customers by 2026.
