Invest1 publisher2 min readPublished
Citizens pleads racketeering over 30-plus mortgage staff who left for SoFi
Citizens brings a civil RICO count over SoFi's hiring of more than 30 of its mortgage employees across nine states, and asks a Connecticut federal court to bar use of the client data and pricing models it says left with them.
The Investor · Invest desk
What happened
- Citizens Bank sued SoFi Bank over the departures of more than 30 loan officers and other mortgage staff, alleging SoFi induced them to breach confidentiality and non-solicitation agreements.
- The complaint pleads civil RICO, a claim American Banker says is typically reserved for organized crime and that Citizens is the latest mortgage player to bring against a rival.
- Citizens dates the alleged campaign to 2024, when an executive vice president in its consumer lending department left for a similar position at SoFi.
- SoFi, a significant home equity originator, reported $1.4 billion of mortgages in the second quarter, with billion-dollar origination volumes in recent quarters.
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Why it matters
- cost Citizens sued the hiring bank and left the individual employees off the complaint, so the defense expense sits on SoFi's books and anyone pricing a team lift has to add it to the offer.
- constraint The injunction Citizens seeks would bar SoFi from using the client and loan data, referral databases and pricing models it says walked out.
- contradiction American Banker's own record cuts against the headline count: RICO claims against real estate companies have seldom reached trial, while trade secrets suits are the ones where lenders have secured settlements.
The $5 million is revenue, not damages. It is what the staff who left Citizens' Connecticut branch had produced in the year before their departures, according to the complaint [8]. The suit names nine states and hiring over the past two years [11], so the 30-plus departures average about three and a third people per state [1]. Multiply Connecticut's $5 million by the nine states named and you get $45 million a year [2]. Citizens does not make that claim; the figure it put on the record covers one state [8].
The comparison available on the other side is SoFi's reported $1.4 billion of mortgages in the second quarter [16]. One is a quarter of company-wide originations, the other a year of production at a single branch. Citizens, a retail and correspondent lender that ended its wholesale operations in 2023, does not publish its residential mortgage volume [17], so the $5 million is the only sizing in the record.
Citizens calls the hiring a "nationwide campaign" [6] and says the departing staff took client and loan data, referral databases and pricing models, in breach of their employment agreements [12]. "Here in Connecticut, SoFi has decimated Citizens' mortgage business and essentially eliminated its market presence," the complaint read [7]. The employees were allegedly lured by SoFi's promises to expand its mortgage business [14].
A Citizens spokesperson declined to comment and a SoFi representative did not respond to a request for comment [9]. Law360 reported the suit first [5]. American Banker calls a federal poaching complaint between banks in the mortgage space rare, and says the accusations of branch raiding and lifted client information usually travel between independent mortgage banks and brokerages [4].
Dismissal of the racketeering count is the likeliest ending I can see, and Citizens also pleaded misappropriation of trade secrets, so the case would carry on in that narrower form [15]. Settlement is the other ordinary ending. The third path is the one that changes hiring budgets: if a Connecticut judge lets the RICO count into discovery on these facts, a bank lifting a mortgage team out of a competitor is buying years of document production along with the pipeline [11].
What to watch
- Whether the Connecticut court dismisses the civil RICO count or lets it into discovery.
- Whether Citizens amends to name individual employees or puts a total damages figure beyond the $5 million from Connecticut.
- Whether other chartered banks copy the racketeering theory in their own mortgage departures cases.