Report: Solid Financial Accused of Faking Revenue Numbers to Entice Investors
FinTech-as-a-Service firm Solid Financial is being accused of falsifying its revenue numbers to woo investors.
A lengthy report published Monday (Sept. 18) by FinTech Business Weekly said the company appears to have undertaken a scheme to inflate its booked revenue to present a positive impression for potential backers, including data used in a Series B funding round.
PYMNTS has contacted Solid for comment but has not yet received a reply.
The report, citing internal documents and multiple unnamed sources, said that in order to boost its recorded revenue, Solid took a “very aggressive” approach to signing new customers, onboarding numerous new clients per month despite having less favorable pricing than rivals.
According to the report, the company was able to sign as many clients as it did because of a lack of due diligence, with one source describing Solid’s diligence level as “zero, or less than zero.” Others painted the picture of a company willing to say or do anything to sign clients to demonstrate growing customer and transaction volumes to investors.
The report said Solid would tell prospective clients they could join, pay nothing up front, and get an invoice 30 days later, with another 30 days after that to pay. In some cases, the report said, Solid didn’t even collect payment information upfront or verify customers’ ability to pay.
The report noted that Solid’s board has named a special committee to investigate as investor FTV Capital considers further legal action to recover its investment, the report said.
Solid, its client EZBanc, and bank partner Evolve Bank & Trust are also being sued for more than $9 million by BSI Group LLC and International Business Solutions Group, which accused the defendants of fraud, negligence and breach of fiduciary duty in a May lawsuit, the report said.
According to the report, EZBanc is run by “Gregory Donahue,” also known as Gregory Mancuso, who was banned from the industry by securities industry regulator Finra, and who allegedly has ties to convicted Russian money launderer and one-time federal informant Mikhail Syroejine.
PYMNTS has reached out to Evolve and EzBanc for comment as well, but has not yet gotten a reply.
Solid Financial raised $63 million in a Series B funding round last year, with the company saying it would use the funds to speed its expansion into new verticals, such as travel, logistics, construction, healthcare, education and the gig economy.
As PYMNTS wrote, the company’s platform lets companies launch and scale FinTech products with just modern application programming interfaces (APIs) and a few lines of code.
“We built the most comprehensive [FinTech] infrastructure from the ground up, so others don’t have to,” Solid Co-founder and CEO Arjun Thyagarajan said at the time.
“Now, any company can quickly spin up bank accounts, crypto wallets, send payments and issue cards to their end users, right in their product experience, while Solid does the heavy lifting of building and maintaining compliant [FinTech] infrastructure,” he said.
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