A Wyoming Bank Is Now Laying Off Amid Federal Lawsuit

September 1, 2024

A Wyoming bank is now laying off amid a Federal lawsuit over a denied ‘master account’, which is limiting the company from growing.

Custodia Bank, a digital asset-focused institution chartered in Wyoming, has laid off some employees as it continues its legal battle with the Federal Reserve over a denied master account.

Founder and CEO Caitlin Long explained in a statement to Banking Dive that the bank is “right-sizing” to ensure it can continue operations while conserving capital during the lawsuit against the Fed.

She also mentioned the layoffs would last until the conclusion of what she described as “Operation Choke Point 2.0,” referring to a perceived ongoing crackdown on digital assets under the Biden administration.

This term recalls an Obama-era initiative aimed at restricting access to banking for high-risk industries such as payday lending and gambling.

Custodia informed its staff on Thursday that nine out of its 36 employees would be laid off, according to Fox Business.

Custodia Bank was denied a master account early last year, which would allow it access to the Federal Reserve’s liquidity facilities, including payment services.

In April, a federal judge ruled that there is no federal requirement for the Fed to grant a master account to every eligible institution, leaving the lawsuit ongoing.

According to a source familiar with the situation, Custodia is facing challenges due to the significant costs associated with not having its own Fed master account.

The bank has been debanked twice by partner institutions and has reportedly faced pressure from Fed regulators behind the scenes.

Caitlin Long stated in an email that the crackdown on digital assets has severely impacted the compliant U.S. crypto industry, and Custodia has felt the effects despite its strong risk management and compliance history.

This month, leading Democrats held a Zoom meeting with members of the crypto industry in an effort to mend relations.

However, tensions arose when Deputy Treasury Secretary Wally Adeyemo asserted that there was no coordinated effort to exclude the crypto sector from traditional banking.

In response, a crypto executive asked attendees to indicate how many had been denied banking services due to White House policies, prompting nearly all industry representatives to raise their hands.

A Custodia spokesperson did not provide details about which roles were affected by the recent layoffs.

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Also Read: The US Treasury Direct is Now Freezing Customer Accounts

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Citibank now fires a whistleblower for ‘underperformance’, after the former employee provided records requested by the OCC.

Citi has filed a countersuit against its former employee, Kathleen Martin, alleging that she was terminated not for refusing to falsify records for the Office of the Comptroller of the Currency (OCC), as she claimed in her lawsuit from May, but rather for being unable to properly fulfill the duties of her role.

Martin, who was let go from her position as Citi’s interim data transformation chair in September 2023 after nearly two years with the bank, had alleged in her lawsuit that she was fired for not agreeing to Chief Operating Officer Anand Selva’s request to conceal information from the OCC that would make the lender “look bad.”

In a revised lawsuit, Kathleen Martin has accused Citi’s Chief Operating Officer Anand Selva of intentionally deceiving the bank by wanting to misrepresent Citi’s compliance metrics to the Office of the Comptroller of the Currency (OCC).

Martin claims Selva sought to conceal information from the OCC that would have made the bank “look bad.”

However, Citi maintains that Martin’s termination in September 2023 was not due to her refusal to falsify records, but rather because she lacked the necessary “leadership and engagement skills” to effectively execute the role of interim Data Transformation Chair, which she had been appointed to after the previous chair, Rob Casper, departed the company.

Citi asserts that during Martin’s interviews and assessment for the interim role, it was identified that she needed to improve in areas like her “dogmatic nature, lack of innovation and lack of experience driving the execution of complex change across Citi.”

Once Casper left, Citi’s senior leadership, including COO Selva, determined that Martin could not successfully fulfill the demands of the interim chair position.

According to Citi, COO Anand Selva tried to help the plaintiff, Kathleen Martin, improve her performance in the interim Data Transformation Chair role.

Selva allegedly set up one-on-one meetings and working groups to facilitate better collaboration and working relationships with stakeholders.

Selva’s HR team also provided Martin with a senior mentor to support her development.

In May 2023, Citi leadership discussed a plan to improve Martin’s performance.

In July, Selva conveyed Martin’s mid-year review before she raised any concerns about his behavior.

Soon after, Martin contacted HR and expressed fears about her job security.

Citi claims that Martin “felt her position was at risk,” but the bank asserts that internal documents showed she “exceeded expectations” and that CEO Jane Fraser had commended her for her “gravitas” and ability to build “strong relationships” at the bank.

However, Citi says Martin failed to heed the feedback provided, and she was ultimately removed from the Data Transformation Chair role because she lacked the “executive level relationships” and leadership needed to successfully execute the data transformation efforts.

Citi says the data transformation work was too critical for the bank to tolerate Martin’s underperformance.

Citi denies Martin’s claims that she protested the reporting of a key metric accurately or that Selva objected to it.

The bank says Selva and Martin met in September 2023 to discuss reporting certain metrics using red, amber, and green scales.

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Also Read: A Massive US Bank is Now Closing Credit Cards

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