Figure Technology Is Alleged to Be a Risky Home Equity Lender Masquerading as a Blockchain Innovator

"Prior to joining Figure, I was convinced that everything was happening on chain, like beginning to end. And that's not the reality." — Former Figure Employee

Figure Technology Solutions was founded in 2018 by Mike Cagney, who previously co-founded SoFi. The company is the #1 non-bank HELOC lender in the US and has grown loan originations approximately 74% since 2020. It went public in September 2025. Substantially all of Figure's revenue comes from its HELOC business, yet it trades at a 103% forward earnings premium to fintech peers — a gap Morpheus Research attributes entirely to its blockchain narrative.

Figure lends money to homeowners through home equity lines of credit — essentially loans secured against the value of a borrower's home. The company claims that by processing these loans on its affiliated Provenance Blockchain, it can approve and fund HELOCs faster and more cheaply than competitors, and pass those savings on to borrowers. It also operates Figure Connect, an electronic marketplace where third parties can buy and sell these loans, and a suite of blockchain-adjacent products including a stablecoin (YLDS), a DeFi lending platform (Democratized Prime), and an on-chain stock exchange (OPEN). Morpheus Research alleges the blockchain component is largely cosmetic — loans are originated through conventional means, and the blockchain is used only as an after-the-fact database.

• 01

  Figure's loan origination system "does not rely on the use of blockchain technology," per its own SEC filings — directly contradicting repeated public claims by its Chairman, CEO, and CFO that all loans are originated "end-to-end on the blockchain." Former employees confirm loans are only recorded to the blockchain after funding. Misrepresentation

• 02

  Figure's claimed blockchain efficiencies — including a 93% reduction in origination costs and 80% reduction in securitization audit costs — appear to be misrepresented. A competitor's employee confirmed the 20% loan audit rate Cagney attributes to blockchain is simply a standard industry requirement from ratings agencies, applied equally to lenders that don't use blockchain at all. Misrepresentation

• 03

  Figure Connect, promoted as a "capital-light marketplace" Figure "does not even touch," appears to be substantially propped up by Figure's own purchases. Per its own S-1, only 53.5% of early Figure Connect volume was transacted by third parties. The $200M Sixth Street JV — announced to provide external liquidity — contributed only $49.6M and appears to have not purchased a single HELOC as of December 2025. Financial

• 04

  Figure's DeFi lending platform, Democratized Prime, is described by Cagney as the "killer app" but is 94% composed of Figure's own HELOC pools. Figure is paying above-market rates of ~8.7% to borrow on its own DeFi platform while conventional warehouse lines sit largely unused at ~5.5%. Its yield-bearing stablecoin YLDS had 99% of supply controlled by Figure and a single passive investor at year-end 2025. Financial

• 05

  Figure's underwriting is alleged to resemble pre-2008 practices: no title reports required, reliance on automated valuations former employees called unreliable, and lending against investment properties. Delinquencies on loans held for sale rose from 3.91% to 5.46% between 2024 and 2025, while BofA's HELOC delinquencies declined over the same period. 90+ day delinquencies in Figure's securitization pools are alleged to be twice the level of comparable pools from Rocket Mortgage and Spring EQ. Credit Risk

• 06

  Chairman Cagney has sold $64 million worth of FIGR shares since IPO at an average of $28.50 per share — with zero purchases — despite publicly calling $30 a "goofy" price and suggesting he might personally "push up the bid." An active UCC filing also suggests an undisclosed pledge of 2 million shares. Insider Activity

Morpheus Research concludes that Figure is an undifferentiated HELOC lender with aggressive underwriting practices, whose blockchain narrative appears to be a fabrication unsupported by its own regulatory filings. The firm holds a short position and expects the market to re-rate the stock as the blockchain premium collapses under scrutiny, while rising delinquencies and stalling blockchain initiatives expose the reality of the underlying business.

IMPORTANT LEGAL DISCLAIMER: This summary is produced by Activ8 Insights and is based solely on the research report published by Morpheus Research on April 16, 2026. All allegations, findings, and conclusions are those of Morpheus Research and represent opinions, not statements of fact. Activ8 Insights holds no position in any security mentioned and does not endorse or verify the claims contained herein. As of the publication date, Morpheus Research holds short positions in Figure Technology Solutions Inc. (NASDAQ: FIGR) and will realize gains in the event that the price of those securities declines. This is not investment advice. You should do your own research and due diligence before making any investment decision with respect to the securities covered herein.