Hey all, Jason here.

I’m putting the final touches on this week’s newsletter from my hotel room in Las Vegas — a LITTLE behind schedule, due to travel and jet lag. Looking forward to spending the next couple days catching up with industry friends and colleagues. I do have three official speaking engagements you can catch me at:

Monday, 2:45p-3:10p, I’ll be recording a live podcast with Neha Narkhede, cofounder & CEO of Oscilar. We’ll be discussing “AI That Works: Building Real-Time Risk Systems for Financial Institutions.”

Monday, 3:30p-4:00p (guess I’ll be sprinting to this one!), I’ll be moderating a panel on “The Partnership Imperative: Why Banks and Fintechs Need Each Other Now More Than Ever.” I’ll be joined by speakers Sara K. Weed (Gibson Dunn), Rusty Pickering (Ingo Money), and Joel Sherwin (Galileo Financial Technologies).

Tuesday, 2:15p-2:40p, my podcasting partner-in-crime Alex Johnson, founder of Fintech Takes, and I will be discussing the latest fintech/banking/crypto news we’ve gathered, fresh from the conference floor (and happy hours).

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FBI Raids Embattled Evolve, Arrests CEO, “Boy Scout” Bob Hartheimer, on Child Porn Allegations

The Federal Bureau of Investigations executed arrest and search warrants at Evolve Bank & Trust’s Memphis headquarters last Thursday morning, a spokesperson for the FBI confirmed via phone and Fintech Business Weekly was the first to report.

Evolve’s CEO, “Boy Scout” Bob Hartheimer, was escorted out of the bank by FBI agents dressed in fatigues, eyewitnesses to the latest shocking development at the embattled bank told Fintech Business Weekly. The FBI also seized Hartheimer’s laptop, according to sources familiar with the investigation.

Hartheimer was appointed to the role just less than three months ago, though he had served as a consultant to the board and teams within the bank for about a year.

At the time he was appointed, Evolve Board Chairman Steve Valentine lauded Hartheimer’s credentials and character, saying in part, “Appointing Bob Hartheimer as CEO marks a turning point for Evolve… 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 sustainable 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 bank appears to have since deleted a page on its website annoucning Hartheimer’s appointment.

Hartheimer also remains a senior advisor to regulatory consulting shop Klaros Group and the lead independent director on the board of consumer lender CardWorks, according to his LinkedIn profile.

Beyond confirming the raid at Evolve’s headquarters to execute the arrest and search warrants, a media liaison for the FBI’s Washington, DC, office directed any further “post-arrest” inquiries to the relevant US attorney’s office — which, the FBI representative specified, is the US Attorney for the Western District of Tennessee.

Inmate records for Shelby County, where Evolve’s headquarters is located, indicate Hartheimer’s arrest stems from two child pornography-related charges, M6402, Sexual Exploitation of Minor-Material-Photograph and M3705, Obscene Material-Distribution.

An indictment or charging documents were not immediately available. Hartheimer is scheduled to make an initial court appearance this Tuesday, October 28th, at 2:00pm.

Per Fintech Business Weekly’s prior reporting, it is the US Attorney for the Southern District of New York, not Western Tennessee, and the Department of Justice’s Money Laundering and Asset Recovery Section that have been probing Evolve related to its involvement in as much as $95 million of missing customer deposits in the Synapse disaster and alleged widespread criminal money laundering through the bank.

In response to questions and a request for comment, Evolve spokesperson Eric Helvie sent a brief statement which reads in part, “We are aware of the situation. The Board of Directors is treating this matter with the utmost seriousness and Mr. Hartheimer has been terminated effective immediately.”

With Hartheimer out as CEO after less than three months, Evolve President and CFO Mark Mosteller and EVP and General Counsel Joelle Weltzin will oversee operations at the bank, Evolve’s statement says.

The US Attorney’s Office for the Western District of Tennessee and the St. Louis Federal Reserve did not responded to requests for comment. The Arkansas State Bank Department declined to comment.

Trump Pardons Binance Founder Behind Crypto Exchange That “Critically Undermined” Iran Sanctions, Was Favored By Terrorist Groups

From Binance’s inception in 2017 until around August 2021, users could open accounts and trade on the platform by providing only an email addresses.

This, uh, “low friction” approach to user onboarding helped propel it to be the largest crypto exchange in the world by volume, thanks in part to enabling individuals in comprehensively sanctioned jurisdictions to access the platform and by allowing criminals to easily conduct illicit transactions on Binance that would have been more difficult or impossible to execute elsewhere.

Indeed, according to the 2023 charging documents, “[b]etween August 2017 and October 2022, Binance caused, according to its own data, at least $890 million in transactions between U.S. users and users Binance identified as Iranians; and millions more in transactions between U.S. users and users in other comprehensively sanctioned jurisdictions, including Cuba, Syria, and the Ukrainian regions of Crimea, Donetsk, and Luhansk.”

A sentencing memorandum prepared by prosecutors in Binance CEO Changpeng Zhao’s case argued that “Binance critically undermined the effectiveness of U.S. sanctions against Iran by providing its Iranian customers the ability to transact with the U.S. customers that Binance depended on to provide liquidity on the exchange.”

Per a Treasury statement on the case, Binance allowed illicit actors to freely transact on its platform, including Al Qaeda, the Islamic State of Iraq and Syria (ISIS), Hamas’ Al-Qassam Brigades, and Palestinian Islamic Jihad (PIJ).

Binance and Zhao ultimately settled the cases, with Binance forfeiting around $2.5 billion and paying a criminal fine of about $1.8 billion. While prosecutors had sought a 36-month sentence for Zhao, he paid a $50 million fine and was order to serve four months in prison.

Now, Trump, the self-declared “first crypto president,” has pardoned Zhao.

The pardon, understandably, isn’t without controversy.

Administration spokesperson Karoline Leavitt has painted Zhao as something of a crypto martyr, saying, “President Trump exercised his constitutional authority by issuing a pardon for Mr. Zhao, who was prosecuted by the Biden Administration in their war on cryptocurrency. In their desire to punish the cryptocurrency industry, the Biden Administration pursued Mr. Zhao despite no allegations of fraud or identifiable victims.”

Leavitt continued, adding, “These actions by the Biden Administration severely damaged the United States’ reputation as a global leader in technology and innovation. The Biden Administration’s war on crypto is over.”

But Trump’s decision to pardon Zhao didn’t come out of nowhere.

Zhao and his team — which includes a lobbyist who is a personal friend of Donald Trump Jr. — have been lobbying the Trump administration for months. And Binance accepted a $2 billion investment from an Emirati-backed firm paid in USD1 — the stablecoin issued by Trump’s crypto firm, World Liberty Financial, effectively generating $2 billion in reserve assets that World Liberty Financial can collect the yield on.

World Liberty Financial’s own token, WLFI, jumped some 14% on the news of the pardon.

Waller Teases “Skinny” Fed Master Accounts

At last weeks inaugural Payments Innovation Conference, current Federal Reserve Governor and rumored candidate to replace Jerome Powell as Fed Chair Christopher Waller floated the idea of a “skinny” version of a Fed master account.

Access to Fed master accounts for firms other than insured depository institutions has been a battleground for some time. The accounts enable firms to hold reserves at the Fed in central bank money, the ultimate risk-free asset used for settling inter-bank transactions. Master account access is typically a prerequisite for access to key pieces of financial infrastructure, including FedNow, FedWire, and ACH payment rails, for example.

Non-traditional institutions that have sought master account access, like Custodia Bank, a Wyoming-chartered special depository institution (SPDI), and The Narrow Bank haved faced extensive delays before ultimately having their applications declined.

But with growing interest in novel state-issued charters and the recent surge of OCC trust bank charter applications, primarily though not exclusively from crypto and stablecoin firms, the master account question isn’t likely to go away anytime soon.

With crypto and stablecoin firms proving willing to exercise their newfound political power and an amenable executive in President Trump, some members of the Fed seem more open to the idea of loosening access to master accounts than they have in the past.

At last week’s first-ever Payments Innovation Conference, Fed Governor Waller floated the idea of a new kind of “payment account” at the Fed, which he described as a “skinny” master account.

Currently, applicants must be legally eligible for a master account and face a discretionary, tiered review process. Federally-supervised non-insured institutions (like OCC trust banks) and non-federally supervised non-insured institutions face considerably elevated review standards and have, to date, infrequently be able to win access to Fed master accounts.

Per Waller’s remarks, “The payment account would be available to all institutions that are legally eligible for an account and could be beneficial for those focused primarily on payments innovations.”

The account could obviate the need for third-parties to work through traditional banks and their Fed master accounts to conduct payment services. Waller suggested such payment accounts at the Fed would, unlike traditional master accounts:

• pay no interest
• be incapable of overdrafting (even intraday)
• would lack access to Fed discount window
• could face possible balance caps

Waller explained that “[t]he idea is to tailor the services of these new accounts to the needs of these firms and the risks they present to the Federal Reserve Banks and the payment system. Accordingly, and importantly, these lower-risk payment accounts would have a streamlined timeline for review. Payments innovation moves fast, and the Federal Reserve needs to keep up.”

Don’t get too excited though. Waller cautioned “that this is just a prototype idea to provide some clarity on how things could change.”

Open Banking ANPR Comment Letter Deadline

Nearly 14,000 comments were submitted in response to the Consumer Financial Protection Bureau’s advance notice of proposed rulemaking to “reconsider” the personal financial data rights rule called for section 1033 of Dodd-Frank.

The history here is pretty well-worn at this point. The ANPR sought input on a number of questions and topics, including:

• Who should be able to request data on behalf of a consumer, with a particular focus on the meaning of the term “representative” and whether or not the rule should restrict such third parties acting on behalf of consumers to those acting in a fiduciary capacity;
• Whether or not the existing personal financial data rights rule’s prohibition on data providers charging fees is the best reading of the underlying statute and estimates of reasonable costs for data providers of varying sizes to comply with the rule;
• Whether the existing rule provides for adequate protection of consumers’ data, both from an information security and from a privacy perspective;
• If data providers have experienced unexpected difficulties or costs to comply with the existing rule;
• And what an appropriate implementation and compliance timeframe should look like.

Although nearly 14,000 comment letters were filed, many appear to be duplicate form letters that stakeholders supporting open banking — including the crypto industry — may have encouraged and facilitated their end users to send.

For example, a cursory review of comments shows numerous exact copies of this letter:

Dear Personal Financial Data Rights Reconsideration,

I am writing to urge you to protect open banking and defend financial freedom that millions of Americans rely on every single day.

Managing money isn’t easy, especially when household budgets are already stretched thin. Open banking has made this easier by allowing families to securely connect their bank accounts to trusted services—helping us track spending, save for emergencies, shop for affordable loans and even pay in manageable installments through tools like Buy Now Pay Later. These tools aren’t luxuries. For many of us, they are lifelines that keep us on top of bills, help us avoid debt, and provide peace of mind about our financial future.

Open banking is about affordability, fairness, and opportunity. It ensures families can stretch every paycheck further, helps small businesses stay competitive, and supports the kind of innovation that makes financial services more accessible. Without these protections, Americans would be forced to pay more for less and lose tools that bring real value to our daily lives.

I urge you to stand with consumers and families —not against them— and keep open banking protections strong. Protecting this rule means protecting financial freedom, affordability, and stability for millions of Americans.

As well as numerous duplicates of this comment letter, touting the connection between open banking and the crypto industry (emphasis added):

Dear Personal Financial Data Rights Reconsideration,

I am writing to urge you to protect open banking and defend Americans’ right to financial freedom in the digital economy.

Big Wall Street banks are trying to roll back the Section 1033 rule—the foundation of open banking, which guarantees that consumers own their financial data and can share it with the services they trust. Without these protections, banks could block access, impose inflated fees, and prevent people from connecting their accounts to modern financial tools—including crypto wallets and exchanges.

For millions of Americans, crypto isn’t just an investment, it’s a way to participate in a new and innovative financial system. Open banking makes this possible by allowing people to securely transfer funds, fund wallets, and use crypto services seamlessly. Without it, consumers would lose the ability to connect to the digital economy on fair terms, leaving them dependent on the old system that benefits only the biggest banks.

If big banks succeed, they won’t just raise costs—they’ll stifle innovation, limit freedom, and deny Americans the chance to choose the tools that work best for them. At a time when the U.S. should be leading on financial innovation, we can’t let entrenched interests hold us back.

I ask you to stand with consumers, innovators, and crypto enthusiasts—not big banks—and keep open banking protections in place. Protecting this rule means protecting financial freedom, innovation, and America’s leadership in the digital economy.

Given the sheer volume of comment letters, reviewing all of them was impractical, but the specific missives from trade associations representing fintechs, groups representing banks, and from some of the open banking aggregators themselves provide a good overview of where the fault lines in the debate remain.

Financial Technology Association Leads Charge In Favor Of Open Banking

The Financial Technology Association, the trade group that took up the mantle defending the existing open banking rule after the CFPB, under acting director Vought’s leadership, switched sides to join the Bank Policy Institute in asking for the rule to be vacated, was joined by other financial, crypto, and retail associations in submitting a comment letter regarding the proposed do over.

FTA was joined by a variety of stakeholders, including the American Fintech Council, the Blockchain Association, the Crypto Council for Innovation, FDATA, National Association of Convenience Stores, National Grocers Association, and the National Retail Federation.

The arguments in the five-page comment letter boil down to three key points: that the CFPB should not restrict who can access consumers’ data on their behalf to “fiduciaries”; that the CFPB should, as in the original rule, prohibit fees; and that any re-formulated rule should include appropriate compliance deadlines.

The groups’ letter argues that nothing in the relevant text of the underlying statute, part 1033 of Dodd-Frank, requires a third-party acting on behalf of a consumer to have a fiduciary relationship with that consumer. In fact, the letter notes, most banks themselves do not have a fiduciary relationship with their customers.

Interestingly, regarding fees, the trade groups argue the text of Dodd-Frank does prohibit fees. Specifically, the letter notes that 1033 “says that banks ‘shall make available’ consumer financial data ‘upon request.’ This isn’t a suggestion or a service banks can charge for—Section 1033 refers to it as the consumer’s ‘right.’”

Finally, the trade groups argue a timeline for required compliance, tiered by institution size, is critical to prevent unnecessary implementation delays.

The comment letter calls for the CFPB to keep the timelines from the existing rule, saying, “We recognize that the Bureau intends to undertake a separate rulemaking related to existing compliance timelines. We believe the current timelines give banks an appropriate runway and should not be changed.”

Bank Policy Institute Pushes for Narrow Reading of Statute

The Bank Policy Institute, the organization that, together with a small Kentucky bank and the Kentucky Bankers Association, filed the lawsuit challenging the original open banking rule largely reiterates the arguments it has previously made.

Specifically, BPI’s comment letter argues that:

• the, under section 1033 of Dodd-Frank, the CFPB lacks authority to mandate data sharing with commercial entities (vs. “consumers”) or to prohibit data providers from charging fees;
• that the market is “functioning well” without government regulation, which, BPI argues, is evidenced by the recent announcement between JPMorgan Chase and open banking aggregator Plaid that the two had reached a deal that will see Plaid pay for access to Chase’s consumer data;
• that the CFPB should suspend the compliance deadlines in the existing rule as soon as possible;
• that any rule issued pursuant to 1033 must be “narrow, consistent with the statute, to require only that consumers have the right to obtain their own data”;
• that nothing in 1033 authorizes the CFPB to prohibit data providers from charging fees;
• that the existing rules “forced sharing of payment initiation” exceeds the authority granted by 1033;
• that the existing rules “failure to allocate liability for security breaches” will cause consumer harm;
• that the existing rules “failure to address the role of data aggregators in the data sharing ecosystem” poses risks to consumer privacy;
• and that any final rule should have at least a two-year implementation period.

Plaid, Despite Agreeing to Pay Fees, Argues They Should Be Prohibited

While Plaid’s position and its arguments roughly align with those put forth by the Financial Technology Association and the other trade groups, it’s worth highlighting them specifically, as Plaid and the other open banking infrastructure firms arguably have the most at stake here.

Plaid’s comment letter argues that:

• without a rule that grants consumer a strong data access right, “individual consumers are at risk of being de-banked and denied access to the services they want”;
• the comment letter plays to its audience in the current administration, using crypto examples to illustrate its arguments: “Take, for example, a crypto investor: in order to invest, their first step is to fund their crypto wallet by connecting their financial institution account to their chosen crypto exchange. To do that, the individual needs to be able to digitally access and share some of their financial information, like their account and routing number, from their financial institution with their exchange. If the financial institution blocks access to this information, the individual will not be able to fund their wallet to invest in crypto”;
• when it comes to the reformulated rule the CFPB is working on, Plaid argues that the Bureau “should confirm that any third-party representative properly authorized by the individual consumer is entitled to access data under Section 1033”;
• that, despite Plaid already agreeing to pay fees, undermining its own argument, the Bureau should confirm that section 1033 of Dodd-Frank prohibits data providers from charging fees for data access;
• and that the Bureau should confirm existing Gramm-Leach-Bliley Act safeguards serve as “a proper means to protect individuals’ financial information and should more strongly incentivize the elimination of screen scraping.”
• “For example, seeking to take advantage of perceived regulatory uncertainty, some institutions have threatened to effectively “paywall” consumers’ own data by refusing authorized third-party access unless anticompetitive fees are paid.”

Things To Know & Other Good Reads

FinCEN Identifies $9 Billion of Iranian Shadow Banking Activity in 2024 (FinCEN)

Surrogacy Is a Multibillion-Dollar Business. Sometimes the Money Goes Missing. (Wall Street Journal)

The Future of Fintech Report (Silicon Valley Bank)

What Happens in Nevada … May Impact Prediction Markets and Sports Gambling Across the U.S. (Manatt)

Key takeaways from the FDIC and OCC supervisory proposals (Davis Polk)

Glimmers Of Clarity Appear Amid Open Banking Disarray (McGlinchey)

Stablecoin-linked Cards Show The Future of Credit Cards (Fintech Brainfood)

The Fintech Product Builders Toolkit (Fintech Under the Hood)

Fortress of Distrust (Fintech Takes)

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