Golden coils in soil with young plants
In the latest twist in the saga of Aspiration, the troubled Marina Del Rey, California-based neobank is suing fraud prevention platform Socure, saying it shouldn’t have to pay a $4 million bill for a contract it canceled. The suit alleges that Socure failed to deliver adequate services and then won a pricey contract renewal in part by providing Deepak Kumar, Aspiration’s former chief administrative officer, with lavish personal benefits and gifts.
“It’s absolute nonsense, completely untrue and slanderous, to be honest,” Kumar says of the allegations. As for Socure, it said in an emailed statement to Forbes: "We do not comment on pending litigation, but we look forward to defending this matter through the legal process.”
Aspiration was launched in 2013 as an environmentally-conscious digital bank and raised nearly $600 million from big-name backers including Leonardo DiCaprio, Drake, Robert Downey Jr. and billionaire Steve Ballmer. In mid-2021, it struck a deal to go public via a special purpose acquisition company (SPAC) that would bring in more than $400 million in fresh capital and value the neobank at $2.3 billion.
But then the market for fintechs and SPACs collapsed and Aspiration’s growth stalled. In early 2023, the fintech started to emphasize the sale of carbon credits, instead of consumer banking, and laid off more than half its staff, including Kumar, who oversaw the company’s consumer-facing banking operations. By the end of the year, CEO Olivia Albrecht had left. Today, Aspiration’s consumer business is operated by San Francisco-based Mission Financial Partners and it continues to sell carbon credits under the brand Catona Climate.
According to the suit filed on April 3 in Superior Court of the State of California for the County of Los Angeles, Central District court, Aspiration first entered into a three-year contract with Socure for its fraud prevention and know-your-customer services in 2018 with an automatic renewal date scheduled for November 2021. Aspiration alleges that during the initial three year period, Socure’s platform underperformed expectations. In 2020, the neobank experienced fraud losses of $571,724 and estimates that Socure prevented $261,160 in additional losses. Those prevented losses represent 31% of Aspiration’s total fraud threats for the year, but falls short of the “up to 95% reduction in third-party and synthetic identity fraud,” Socure advertises, according to the complaint.
As the renewal date for the contract approached, Aspiration alleges that Socure claimed its product’s performance would improve if the neobank upgraded their service tier and began paying for additional features. In an effort to bolster its sales campaign, Socure provided Kumar with personal gifts, Aspiration’s complaint alleges.
In December 2021, Aspiration agreed to renew and upgrade its contract with Socure to include additional bells and whistles at a higher annual fee. Through 2022, Aspiration continued to be dissatisfied with Socure’s performance, the suit says.
“Though [Aspiration] significantly increased the scope of services it purchased from Socure, and its payments for those services, the Service Platform continued to capture no more than 31% of the total threats [Aspiration] faced in a given year, a far cry from the 96% Socure represented it would capture,” the court filing reads.
Socure’s pricing includes an annual license payment, a monthly minimum fee and a variable fee that depends on a client’s transaction volume and services used. Aspiration’s renewed contract with the fraud firm came with an unpleasant surprise: an added annual minimum provision requiring $2.2 million for the first year of service and $2.6 million for the second year. In 2022, Aspiration paid Socure $700,000 in fees for the services it used. In December 2022, Socure sent Aspiration a bill for $1.5 million to make up the difference between the fees it paid and the annual minimum outlined in the refreshed contract. Aspiration did not pay the bill but continued to use and pay service fees to Socure.
In April 2023, as Aspiration was laying off more than half of staff, including Kumar, it sent Socure a written notice of termination stating that it would immediately discontinue use of the platform. In December 2023, Socure again billed Aspiration for the difference between the service fees paid over the first four months of the year and the annual minimum. The bill amounted to practically the entire $2.6 million since Aspiration stopped using the platform early in the year in favor of its own, internally developed identity fraud prevention system, the suit says.
Aspiration replied by agreeing to pay for the services it used through April 2023 but disputed the annual minimum charges based on its dissatisfaction with the effectiveness of Socure’s platform. In response to Aspiration’s complaints, Socure allegedly referred the neobank to a clause in the contract stating that it provides no warranties regarding the effectiveness of the service.
The complaint is the latest in a string of controversies for Aspiration, which markets itself as an environmentally-conscious neobank. It is best known for a feature allowing consumers to round up purchases to the nearest dollar, donating the extra to tree-planting organizations. In January, Bloomberg reported that Aspiration is under investigation by the Justice Department and the Commodities Futures Trading Commission to see whether it misled clients about the quality of its carbon credits.
