NEW YORK - SoFi burst onto the scene a few years ago as the Uber of finance, promising to disrupt stodgy banks by providing online loans to millennials, wooing them with networking parties and hip subway ads. The comparison with the ride-sharing upstart was a little too apt. SoFi's founder Mike Cagney is resigning amid a harassment lawsuit and claims he fomented an inappropriate work vibe.

The lawsuit and other legal actions allege an environment of sexual misconduct, mishandling of loan applications and violations of workplace rules on breaks and pay. SoFi told the Wall Street Journal last month that it had investigated the allegations and found them “to have no merit.” Yet the company also confirmed this week that the board had approved a payment to an employee in 2012 to settle a dispute with Cagney.

The disclosures threatened to rock one of the more successful fintech startups to date. Launched six years ago by Cagney, a former proprietary trader at Wells Fargo, the firm has grown rapidly by offering student loans and other products to young consumers. Loan originations expanded by 60 percent last year, to $8 billion. SoFi has raised a total of $1.9 billion from Japan’s SoftBank and Silver Lake. The latter’s $500 million investment in February valued the outfit at more than $4 billion.

To sustain the pace, Cagney has been looking at more conventional methods. In June SoFi applied for a banking charter in Utah so it can provide its customers with federally insured deposit accounts and a credit card. Last month, it hinted it was getting closer to going public and disclosed to investors that it had revenue of $134 million in the second quarter and earnings before interest, tax, depreciation and amortization of $61.6 million.

Such ambitions demand more sober management standards – and fewer distractions. On Monday, Cagney acknowledged to employees that the litigation and negative press about him personally “have become a distraction from the company’s core mission.” Cagney is doing the right thing by bowing out, something Uber's founder Travis Kalanick resisted for far too long. The danger is that Cagney, who is remaining CEO until a replacement is found and will serve on its all-male board, will still cast too long a shadow on his creation.



CONTEXT NEWS

- Social Finance, the private online lender, on Sept. 11 said founder Mike Cagney will step down as chief executive before the end of the year.

- In a note to employees, 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.

- 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.



(Editing by Rob Cox and Martin Langfield)

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