Envestnet-fintech dispute takes a nasty turn
The legal dispute between Envestnet | Yodlee and a former fintech partner took a bizarre turn after an anonymous letter was sent to clients of the tech giant accusing it of backhanded business dealings.
The letter accuses Envestnet of entering into a business partnership with the data provider FinancialApps in order to build technology around a credit risk system, called Risk Insights, but that the firm secretly worked with other companies to create a competing product.
“Do you want to know the real truth about Yodlee Risk Insight?” the unidentified author wrote. “Yodlee did not want to do the work or spend the cash to enter the credit market ... Yodlee kept this a secret and marketed Risk Insights as their product.”
Though the author’s identity remains unknown, Envestnet accused Financial Apps of penning the letter after learning clients received copies on Aug. 8, according to court documents filed in a federal court in Delaware. In response, FinApps denied authorship and instead filed a motion to discover the names of the Envestnet clients who received the letter, claiming it sought to ultimately learn more about the author.
The leading TAMP by assets will soon unveil its much awaited Credit Exchange, an exchange platform that offers pre-qualified loans, including security-based, personal loans, fine art and other luxury asset-backed loans, and additional options, according to the firm.
Envestnet would not comment on the pending litigation, a spokeswoman said in a statement.
“However, we hold ourselves to the highest ethical standards with regard to business dealings with customers, partners, and employees, and we will respond appropriately through the proper legal channels.”
FinApps hired high-profile attorney Marc Kasowitz as counsel, a personal attorney for President Trump, who defended the president against sexual misconduct allegations during the 2016 election campaign.
Kasowitz declined to comment on the pending motion.
Envestnet’s chief executive admitted the legal challenge has led to lost revenue, in an earnings call in August. After the falling out, FinApps pulled its technology from the Envestnet platform, which caused the loss of income, said CEO Jud Bergman, adding the firm expects the dispute to negatively impact revenues through the end of the year.
“The vendor suspended service causing a disruption that affected several clients and prospects,” said Bergman in the earnings call. “This vendor also filed a lawsuit against us. We believe the vendors allegations are false and without merit, and we will respond appropriately and defend ourselves vigorously.”
The initial lawsuit, filed in August, is alleging fraud and misappropriation of trade secrets, among others claims, after a partnership between the two firms soured earlir this year. In the 80-page complaint, FinApps also claims it possesses emails in which top Yodlee employees discuss “reverse engineering” the firm’s proprietary technology.
The anonymous letter echoed this argument, accusing Envestnet | Yodlee of not keeping agreements and that it would conduct “business with you all like this in the future no matter your contracts.”
FinApps was founded in 2014 and says it spent tens of millions of dollars to develop the technology, according to court documents. The platform lets financial institutions provide data analysis and credit reports to facilitate consumer requests for credit, loans, mortgages and other types of financing.
Envestnet has risen to the top of the TAMP in large part because of its $660 million acquisition of the data aggregator Yodlee. More than 3,500 enterprises and over 96,000 advisors including 16 of the 20 largest U.S. banks and over 500 of the largest RIAs use Envestnet services, according to the firm.