Last month, prominent social-media influencer Faares Quadri made a cameo in the TikTok feed for fintech start-up Tellus. His video promoted a savings account the firm was offering held at
Capital One,
the bank and credit card giant.
“The high-yield savings account is even FDIC-insured,” says Quadri, whose own TikTok account has 2.6 million followers. “So click to sign up now.”
It’s unclear what viewers who followed Quadri’s advice would have been signing up for.
In response to recent questions from Barron’s, Capital One said the bank has “never offered financial products in partnership with Tellus.” The day after Barron’s inquiries, reference to high-yield accounts with “FDIC coverage via Capital One,” were removed from Tellus’ website.
“Tellus does not claim to have a partnership with Capital One,” a Tellus spokesman told Barron’s this week. Tellus didn’t respond to a question about why previous mentions of Capital One had been removed from its website.
Tellus’ website currently offers uninsured deposit accounts with interest rates as high as 8%. The company spokesman says Tellus doesn’t lend to consumers and “makes business purpose loans on non-owner occupied properties through appropriately licensed and regulated brokers to qualified businesses.”
Earlier this year, mention of partnerships with
Bank of America
and
Wells Fargo
were removed from Cupertino-based Tellus App’s website after Barron’s asked those banks about their relationships with Tellus.
After Barron’s published a cover story on Tellus in April that showed the firm had been using false and misleading descriptions of its products, Sen. Sherrod Brown (D., Ohio), chairman of the Senate Banking Committee, asked the FDIC to investigate.
In addition to the false claims about its banking partners, Barron’s reporting showed that Tellus was using customer deposits to fund riskier loans than advertised, including to real estate speculators and distressed property owners.
Todd Phillips, a law professor at Georgia State University focused on financial regulation, says Tellus is one of an increasing number of what he calls “imitation banks” that operate without supervision.
“We have a very good system for regulating banks, and we have a very long history in this country of firms trying to evade that regulatory system,” Phillips says.
The Tellus spokesman said the company strongly disagrees with the imitation-bank characterization. The firm discloses on its website and in ad fine print that “Tellus is not a bank.”
In July, Tellus attorneys disclosed in a California Superior Court filing that the company received a demand from the FDIC that it revise social media posts and other “consumer-facing materials” about the “nature and extent of deposit insurance available.”
The filing stemmed from an ongoing billing dispute with Hamster Garage, a web marketing firm Tellus had hired to promote its offerings.
Tellus said in the filing that Hamster Garage was responsible for the misleading content. Hamster Garage denied the allegations in its response to the Tellus filing.
Tellus said it doesn’t comment on active litigation. The spokesman said the firm “updated the language on our website to better fit FDIC guidelines.” He said the changes were “based on our dialogue with the FDIC.”
Hamster Garage didn’t respond to requests for comment from Barron’s.
Tellus continues to seek new customers, including through its TikTok channel that features well- known finance influencers and through ad campaigns across
Facebook
and other Meta Platforms sites.
Tellus also continues to promote its relationship with Andreessen Horowitz, which led a $16-million funding round for the start-up late last year. At the time, the venture capital heavyweight praised the firm’s “unique insights around the interplay of real estate, savings, and lending.”
Tellus is listed on Andreessen’s website as one of the “Builders We’ve Backed.”
Andreessen Horowitz didn’t respond to messages from Barron’s.
Barron’s reported in April that about a third of the $100 million that Tellus has lent over the prior two years had gone to businesses affiliated with one San Jose-based real estate firm.
“Traditional banks would never be allowed to get away with something like that.”
Tellus has since further concentrated its lending: 68% of the $26.3 million lent by Tellus between Barron’s story in April and last month has gone to affiliates of that same firm, all for properties in Silicon Valley, according to business registrations that Barron’s matched to records from real estate tracker Attom.
That apparent lack of diversification increases risk for Tellus—and its customer deposits, says Phillips, the Georgia State law professor.
“This is so problematic in so many ways,” he says. “The concentration risk is huge, and traditional banks would never be allowed to get away with something like that.”
The Tellus spokesman says the firm uses “our proprietary algorithm to evaluate concentration risks.” He said the firm doesn’t disclose borrower information but that Barron’s accounting of Tellus’ loans to the San Jose firm are “materially inaccurate.”
Two Tellus mortgages have gone into default since Barron’s April cover story. Tellus has filed lawsuits in California courts seeking some $6 million it claims to be owed by those borrowers, filings show.
Phillips authored a paper on Tellus and other “imitation banks” that was published last week by the Roosevelt Institute, a think tank affiliated with the FDR Presidential Library and Museum.
The paper, which cited Barron’s reporting, called for the government to regulate Tellus and its peers using existing laws, and for Congress to pass new laws to make that regulatory authority more explicit.
“These imitation banks are essentially investments and should be regulated by the SEC,” Phillips says. “But they’re not.”
In his Nov. 14 TikTok video promoting Tellus’ supposed offering with Capital One, Quadri says he recommends Tellus over banks, which he faults for high fees and low interest. It doesn’t identify Quadri, though his face and delivery are recognizable to his millions of followers. (The video was removed from Tellus’ TikTok feed after the publication of this article.)
Helen Ngo, a financial planner in Atlanta, says she’s troubled by the influence that TikTok personalities can have on people’s financial decisions.
“There’s really no fact-checking of some of this stuff,” she says.
Write to Jacob Adelman at [email protected]
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