(Reuters) - Mike Cagney, one of the most prominent executives in the U.S. financial technology sector, will step down as chief executive of Social Finance, the online lender he co-founded, before the end of the year.
In a note to employees on Monday night, Cagney said “a combination of HR-related litigation and negative press have become a distraction from the company’s core mission” focusing attention on him personally.
One of the most valuable private financial technology startups in the United States, the San Francisco-based company known as SoFi launched an investigation this month into claims that current and former employees were sexually harassed at work.
SoFi said Cagney would stay in his role as CEO until a successor was found. He will be immediately replaced as chairman by Tom Hutton, managing director of a venture capital firm focused on insurance and financial technology and an early investor in the company.
“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,” Cagney wrote in the company-wide memo.
A former Wells Fargo trader and hedge fund manager, Cagney co-founded SoFi in 2011 with a mission to take on the banks in the student loan market. He targeted so-called HENRYs - High Earners Not Rich Yet - from elite institutions such as Stanford and Harvard. The timing proved fortuitous – young students were skeptical of traditional banks in the wake of the financial crisis and flocked to the new platform.
Since then, the company has branched out into a variety of financial services businesses, ranging from mortgages to an in-house hedge fund. But it has stayed true to its non-traditional roots, hosting cocktail parties, yoga sessions and singles meetups for its customers, which it refers to as members.
Cagney told Reuters last year that those types of activities were “critical to brand,” but would make it hard for the firm to win approval from regulators for a banking license.
Without a deposit base, the company has relied on investors to fund its lending business. The company has lent over $20 billion to more than 350,000 borrowers in the past six years.
SoFi was valued at more than $4 billion at its most recent funding round, which happened earlier this year. It is the second-most valuable venture-backed financial technology startup in the United States, and its backers include investment heavyweights such as SoftBank and Silver Lake Partners.
The company’s recent woes echo problems elsewhere in the technology sector. Ride-hailing company Uber, also based in San Francisco, is struggling to overcome allegations of sexual harassment and executive misconduct and venture capitalists have also faced criticism over their treatment of female entrepreneurs.
Reporting by Abinaya Vijayaraghavan in Bengaluru and Heather Somerville in San Francisco and Anna Irrera in New York; Editing by Carmel Crimmins and Edwina Gibbs