It has been a bad few weeks for SoFi. Back in August there was the news of a sexual harassment lawsuit from a former employee. Before that there had been several senior executive departures, we have had a class action lawsuit and one of Silicon Valley’s most valuable and revered fintech companies was starting to lose some of its luster.
But the truly shocking news came earlier tonight when the Wall Street Journal reported that CEO Mike Cagney was going to step down by the end of the year. He has already stepped down as Chairman, that was effective immediately, and he will step down as CEO by the end of the year.
Existing board member Tom Hutton, managing director of venture capital firm XL Innovate, will take over as executive chairman, effective immediately. Steve Freiburg, another SoFi board member and former CEO of E-Trade will become vice chairman.
In a letter to employees obtained by Lend Academy Mike Cagney said that he had become a distraction for the company:
The combination of HR-related litigation and negative press have become a distraction from the company’s core mission. I want SoFi to focus on helping members, hiring the best people, and growing our company in a way consistent with our values. That can’t happen as well as it should if people are focused on me, which isn’t fair to our members, investors, or you.
The New York Times is also reporting that “Mr. Cagney may have been overaggressive in expanding SoFi’s business, skirting risk and compliance controls.” That is the first I have heard about any compliance issues and if it is true then this could be a much bigger issue for SoFi.
Regardless of the what the real story this is not good for the industry whatsoever. Just when it felt like we had some momentum and the industry was starting to thrive again this is definitely a setback. The press is going to bring up the issues with Lending Club last year and we will have to deal with more negative sentiment.
I have interviewed Mike Cagneytwice on the Lend Academy Podcast over the years and I have said many times he is one of the smartest people in all of fintech. And while we don’t know exactly what has gone on inside the company, clearly the board believes that a new leader is needed. Hopefully, they can find an experienced CEO who can right the ship and continue the amazing story that has been SoFi.
Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.