Evolve Bank & Trust has appointed Robert Hartheimer as its new CEO, effective immediately, as the bank navigates significant challenges, including a cease-and-desist order from the Federal Reserve and the fallout from the Synapse bankruptcy. The announcement came on Wednesday, marking a pivotal moment for the Memphis, Tennessee-based institution as it seeks to regain customer trust and ensure compliance with regulatory standards.
The new leadership arrives at a time when Evolve is still addressing the repercussions of a June 2024 order that highlighted deficiencies in its banking practices, particularly in anti-money laundering compliance and consumer risk management. Sarah Bloom Raskin, former governor of the Federal Reserve Board and current professor at Duke Law School, commented on Hartheimer’s appointment, stating, “Bob Hartheimer is uniquely positioned to do it because he has experience doing this.” Raskin emphasized Hartheimer’s background, which includes his role in establishing the division of resolutions at the FDIC in 1991, where he prepared 200 troubled banks for sale.
Hartheimer faces the daunting task of restoring Evolve’s reputation following the collapse of its partnership with Synapse, a banking-as-a-service provider. The relationship turned problematic when Synapse filed for Chapter 11 bankruptcy in April 2024, revealing a significant shortfall of between $65 million and $95 million in customer funds. This situation led to numerous lawsuits, including allegations of mismanagement and claims resembling a Ponzi scheme from fintech customer Yotta.
Many customers have expressed a loss of faith in Evolve, according to Bloom Raskin. She remarked, “Many customers of Evolve have lost faith and so lost the ability to feel good about this bank.” Despite these challenges, Hartheimer’s extensive regulatory experience provides a glimmer of hope for a turnaround.
Evolve has since transitioned most of its customer accounts from Synapse to three partner banks: Lineage Bank, AMG National Trust, and American Bank. The bank asserted that there was no shortfall in customer funds at the time of the transfer and noted inaccuracies in Synapse’s records that complicated tracking. In a recent court filing, the Consumer Financial Protection Bureau indicated plans to hold Synapse accountable for the missing funds and may utilize its Civil Penalty Fund to reimburse affected customers.
Despite not being involved with Evolve during the Synapse crisis, Hartheimer defended the bank’s actions, stating, “We have been a Boy Scout in the Synapse matter.” He highlighted the bank’s efforts to recreate accurate financial records, expressing optimism that other banks within the Synapse ecosystem will collaborate on reconciliation.
Hartheimer described the Synapse situation as a wake-up call for the banking sector, emphasizing that new operational methods often lead to increased regulatory scrutiny. “This is not uncommon in the banking business,” he said. “Every baas bank is going through more rigorous compliance and risk changes.”
Under Hartheimer’s leadership, Evolve is actively working on initiatives to improve data management and transaction monitoring, addressing the Federal Reserve’s concerns outlined in the cease-and-desist order. The bank is focusing on enhancing its compliance with anti-money laundering regulations and improving overall risk management.
Reflecting on how he arrived at this role, Hartheimer revealed that he was initially a consultant for the bank when he recognized an opportunity to assist with the consent order. His transition to CEO was a natural progression following discussions with the board.
Board Chairman Steve Valentine stated, “Appointing Bob Hartheimer as CEO marks a turning point for Evolve.” He praised Hartheimer’s extensive corporate experience in navigating challenges at financial institutions and emphasized the board’s full support for his leadership in restoring innovation and transparency at Evolve.
Regarding speculation about a potential sale of the bank, Hartheimer reassured stakeholders that Evolve is financially stable, possessing over 10% capital and sufficient liquidity. “This is not a bank that is forced to do anything,” he said, expressing his commitment to enhancing the bank’s performance across various sectors, including open banking, trust services, and regional lending.
Evolve has a diverse portfolio, including trust and mortgage businesses, which Hartheimer affirmed will continue to thrive. He concluded, “This team is working through reputation adversity, and I think we see a lot at the end of the tunnel that’s getting brighter.”
As Evolve Bank & Trust embarks on this new chapter under Hartheimer’s guidance, the focus remains on rebuilding trust, ensuring compliance, and striving for sustainable growth in the evolving banking landscape.