Regardless of guarantees, Beam depositors nonetheless can not get entry to their funds. Now the lawsuits have began

Beam wanted users to be able to earn higher interest rates on their money with the savings mobile app.

CNBC

Thousands of customers of the savings app Beam, who have not been able to access their credit for months, remain excluded from their accounts despite the company’s promise to process all transactions by October 30th.

This emerges from a lawsuit three beam vendors filed in an Ohio court that allege they were wrongly held responsible for the delays.

The lawsuit calls on the court to order Beam’s cooperation in returning the customer’s money. On its website, Beam claims to have nearly 187,000 subscribers, though a source close to the company has stated that the number of actual accounts could be closer to 30,000. According to the lawsuit, their deposits total more than $ 2.4 million.

CNBC has also learned that San Francisco-based Beam lost its rights to do business in California after failing to file tax returns, according to a spokesman for the state’s Franchise Tax Board.

In Delaware, where Beam is incorporated, the company owes more than $ 182,000 in back taxes and has yet to file its 2019 annual report, according to the Delaware Division of Corporations.

Beam’s CEO, 37-year-old Yinan “Aaron” Du, declined to be interviewed.

A company spokeswoman said in a statement that it is difficult to give an exact date when customers will get their money and said the company is working with its suppliers.

“We believe the funds should be released every day,” the statement said.

The statement also said that Beam is operational despite being appointed by state tax authorities and that the company will be in contact with the Secretary of State’s office to understand why its information has not been updated.

“Designed for the 99%”

Beam, which launched last year, offered to pay interest of up to 7% on amounts deposited through the app. This is the “first mobile high-interest bank account for 99%”.

CNBC reported last month that customers were struggling to access their funds earlier this year. Several said their revocation requests, which Beam’s website should process in three to five working days, had gone unheeded for months.

Beam has blamed its suppliers for the delays, including Dwolla, a Des Moines, Iowa-based transaction processing company, and Columbus, Ohio-based Huntington National Bank, which acts as the custodian for Beam’s client funds. Beam itself is not a bank. It describes itself as a “technology service provider”.

Beam says it was “working very hard” to process their requests in an email sent to customers Monday. The company accused Dwolla and Huntington of failing to act. In an earlier email on Oct. 27 and in a statement made the same day to CNBC, Beam alleged that Dwolla had frozen certain accounts after discovering that customers had committed unspecified fraud.

In its most recent statement to CNBC, Beam said it is not holding the funds in question.

“We have worked with Dwolla and Huntington, the third party vendors, and are making progress, although the pace of progress is now largely up to them. We gave them all the information they needed on November 5th,” the statement said.

A lawsuit filed against Beam in a Columbus, Ohio court earlier last week by Dwolla, Huntington, and a third party vendor, New York-based Stable Custody Group, said Beam’s statements to its customers and were “incorrect” to CNBC.

The lawsuit states that despite Beam’s claims, Dwolla never withheld Beam customer funds. In fact, Dwolla did not hold any customer funds at all.

“Delays in customers receiving their money were entirely due to Beam’s delays,” the lawsuit said.

The lawsuit states that, despite claims that the company is working “around the clock” to resolve the issues, Beam is still not required to provide vendors with instructions on how to return customer funds. The lawsuit stated that only Beam has the information about its customers’ identities and their deposits that would be required to return the money. It is asking the court to order Beam to work with the vendors to return the customers’ funds and deliver a judgment stating that the vendors have acted properly.

“Beam disagrees with some of the allegations mentioned in the complaint at all,” the spokeswoman said in her statement. “By definition, the complaint cannot be considered true as it is submitted by them and is therefore unilateral in nature.”

Chain reaction

Beam’s business model uses what is known as a “sweep account”.

When customers deposit funds through the app, Dwolla moves the money through Huntington National Bank into what is known as a sight deposit market operated by the Stable Custody Group, a New York-based unit of R&T. The funds are then fed into a network of banks that pay interest on the deposits, which Beam can return to customers. When customers try to withdraw their money, the process works the other way around in theory.

As part of the agreement, customers’ funds are FDIC insured. However, since Beam is not a bank, the insurance only comes into play if one of the banks in the chain fails. It does not apply if the beam fails.

All three vendors said they had ended their relationships with Beam when the issues arose over the past few months. However, you are ready to give money back to Beam’s customers.

Stable ended Beam’s participation in the sight deposit market on Oct. 30 and instructed its banking network to repay the Beam funds in accordance with the lawsuit on the Huntington custody account.

“However, Beam has not requested the return of any of these funds to its customers, nor has Beam Dwolla issued instructions to allow these funds to be returned to Beam’s customers,” the lawsuit states.

Huntington “acted promptly to its ongoing instructions from Beam to transfer funds returned to the Beam account by receiving banks, and therefore has not caused any delays in returning those funds to its customers” to suit.

The lawsuit states that all $ 2.4 million of customer deposits are now in the Huntington National Bank’s custody, but “HNB does not and cannot know the identity or amount of the Beam customers who own these funds . ” of these funds owed to each Beam customer. “

“It will be soon”

It’s unclear where the agreements between Beam and its vendors went wrong, but customers looking to withdraw funds describe a frustrating series of automated emails and text messages that offer little information and none of their money.

Florida retiree Glenn Irby, who invested $ 8,000 in Beam as of August, said every withdrawal request gets the same response:

“It will be soon,” he said. But the money never comes.

“I’m retired,” he said. “It’s not easy to have a steady income.”

Steve Wolf opened an account with Beam to hold funds for emergencies. “Now I have to fight and spend hours to get it back,” he said.

CNBC

Steve Wolf, who owns a marketing firm outside of San Diego, has been trying to withdraw the $ 15,000 he has deposited with Beam since September. Wolf tells CNBC that he has now hired an attorney to take possible legal action against the company for the “economic damage” he sustained in a savings instrument marketed as safe.

“This is not money that I lost on the stock market,” said Wolf. “This is money I’ve already made, paid taxes, sat in a savings account, and saved up for a rainy day.”

The Federal Trade Commission opened an investigation into possible “fraudulent practices” at Beam earlier this year, CNBC previously reported. A spokesman for the agency declined to comment on the status of the investigation. Dozens of customers have filed complaints, almost all of which related to their inability to access their funds. This is evident from data CNBC received under the Freedom of Information Act.

– With reports from Scott Zamost, Jennifer Schlesinger and Lorie Konish of CNBC

Please email tips to [email protected]

Comments are closed.