Evolve Bank & Trust Appoints Robert “Bob” Clarke as CEO Amidst Synapse Fallout and Regulatory Scrutiny

evolve Bank & Trust,facing a challenging period following the collapse of its banking-as-a-service partner Synapse,has appointed Robert “Bob” Clarke as its new Chief Executive Officer,effective May 13,2024. The move signals a decisive effort to restore trust wiht clients, regulators, and partners after a year marked by reputational and operational strain.

Navigating Crisis: Clarke’s Extensive Financial Expertise

Clarke brings a wealth of experience in navigating complex challenges within the financial industry. He previously served as a managing director at Promontory Financial Group, a subsidiary of IBM, were he advised financial institutions on regulatory and operational matters.Notably, he played a key role in establishing the Federal Deposit Insurance corp.’s (FDIC) Division of Resolutions in 1991, demonstrating a deep understanding of banking regulation and crisis management.Before Promontory, Clarke was the founder of Jasper, a credit card originator focused on serving customers with limited or no credit history.

“Bob was selected for his unmatched corporate experience in strategically navigating challenges at financial institutions and enabling banks to move past their regulatory challenges,” stated Steve Valentine, Evolve Bank & Trust Board Chairman. “He has the full backing of the board to take decisive action, restore thoughtful innovation, and lead Evolve into a future defined by transparency and lasting growth. This is a structural change, demonstrating our continued commitment to doing the hard work to earn back the trust of our customers, employees, regulators and investors.”

The Synapse collapse and its Aftermath

The appointment of a new CEO comes in the wake of the April 2024 collapse of Synapse, a banking-as-a-service provider. the failure froze approximately $219 million in funds belonging to over 100,000 consumers who utilized Synapse-powered financial products. While the majority of these funds have been returned, a meaningful discrepancy remains.

Jelena McWilliams,the court-appointed Chapter 11 trustee overseeing the synapse bankruptcy,has identified a gap of up to $96 million between the funds held and Synapse’s internal ledgers. Facing depleted resources and unsuccessful attempts to sell the company, McWilliams has petitioned the court to either dismiss the case or convert it to a Chapter 7 liquidation.

Regulatory Response and Consumer Protection

The Consumer Financial Protection Bureau (CFPB) is actively opposing the dismissal or conversion to Chapter 7, arguing that it would hinder efforts to provide restitution to affected consumers. The CFPB advocates for maintaining the case to leverage the Civil Penalty Fund, a resource dedicated to compensating consumers harmed by unfair financial practices.

The CFPB has highlighted “unfair practices” related to opaque “for-benefit-of” account structures and reconciliation failures, estimating the total unresolved harm to consumers could reach $95 million. These concerns center around the lack of transparency in how Synapse managed and accounted for customer funds.

criminal Investigation

Adding another layer of complexity, a grand jury reportedly began investigating potential criminal conduct at Synapse in February 2024. Prosecutors have subpoenaed Synapse’s former finance director, who reportedly raised concerns about missing customer funds prior to the company’s collapse. This investigation suggests authorities are exploring whether intentional wrongdoing contributed to the financial crisis.

evolve’s Path Forward

Clarke’s mandate is clear: to rebuild trust and steer Evolve Bank & Trust towards a more stable and transparent future. His experience in regulatory affairs and crisis management will be crucial as the bank navigates ongoing investigations, addresses consumer concerns, and works to strengthen its operational infrastructure.The board’s “full backing” signals a commitment to supporting Clarke’s leadership and implementing necessary changes to ensure the long-term health and stability of Evolve Bank & Trust. The bank’s future hinges on demonstrating a commitment to accountability and regaining the confidence of its stakeholders.