What is the core allegation in the Morpheus Research report about Figure Technology Solutions (FIGR)?

Morpheus Research alleges that Figure is a conventional HELOC lender that has used a blockchain narrative to justify a premium valuation, while its own SEC filings contradict the company's public claims about blockchain use. The report calls Figure "an intricate blockchain-themed stock promotion hiding a conventional home equity lender with aggressive underwriting while insiders cash out." Morpheus Research holds a short position and stands to profit if the share price falls.

What did Figure's own filings say about "digital twins," and why does it matter?

Figure co-founder June Ou publicly said that tokenizing a real-world asset as a "digital twin" has "no point," and Chairman Mike Cagney posted that Figure's loans are "native, not digital twins." Figure's SEC filings explicitly describe the company's loans as digital twins — tokenized representations of real-world assets backed by traditional legal documents. The Morpheus report argues the contradiction is unusually direct: management publicly derided the exact structure their own regulators filings describe.

What is Democratized Prime, and why does the report say it is concerning?

Democratized Prime is Figure's DeFi lending platform, launched in June 2025, where lenders can provide capital and borrowers can access it. Cagney called it "THE killer app." The platform has eight lending pools, but Figure's own two HELOC pools represent 94% of borrower demand. Per a footnote in Figure's 2025 annual report, Figure paid an average interest rate of 8.7% to borrow approximately $190 million through Democratized Prime, while conventional warehouse lines cost approximately 5.5% and had substantial unused capacity. The report argues Figure appears to be paying above-market rates to fund an internally dominated platform while letting cheaper conventional financing sit idle.

What is the risk that Figure's HELOC product gets reclassified as closed-end credit?

Figure classifies its product as open-end credit under the Truth in Lending Act, which allows it to fund loans in as few as five days. However, borrowers must draw their full loan balance at closing and can only redraw after paying down balances — a structure a former employee said faced "a lot of scrutiny" because it resembles closed-end credit. If regulators recharacterize the product as closed-end, NCUA guidance indicates TRID rules would apply, triggering a mandatory seven-day waiting period before closing. Figure's own prospectus warns that recharacterization "would have a material adverse effect on our business, financial condition, and results of operation."

What happened when Provenance showed $390 quadrillion in on-chain assets?

On March 1, 2026, Provenance Blockchain displayed $390 quadrillion of on-chain assets, largely attributed to three assets including one linked to an entity called "K-R-O Brokers." For comparison, Paxos — PayPal's blockchain partner — acknowledged a $300 trillion mint error and corrected it within two hours. Much of Provenance's erroneous values remained visible on the explorer nearly two weeks later. Neither Figure nor Provenance publicly acknowledged or explained what happened, according to the report.

Morpheus Research: Figure Technology's SEC Filings Say Blockchain Plays No Role in Loan Origination, Directly Contradicting What Executives Tell Investors

The contradiction runs deeper than one misstatement. KPMG audit reports for all 26 Figure securitizations show spreadsheets were used in every case, with file names like "External_v5" suggesting manual version tracking — directly undercutting claims that blockchain made spreadsheet-based collateral management "impossible." Figure Connect, described as a capital-light marketplace where Figure does not "touch" the loans, used $6.8 billion in cash to originate and purchase loans in 2025. The Sixth Street JV announced to bring $2 billion in liquidity purchased zero loans through Connect and was funded with only $49.6 million before its term expired with no renewal disclosed. Provenance Blockchain, described in filings as independent, has June Ou — Figure board member and Cagney's wife — as executive director, with leadership composed of Figure employees since at least July 2025. Meanwhile, Cagney publicly suggested buying at $30 while SEC filings show $64.1 million in sales since IPO and zero purchases.

Ticker: FIGR (Figure Technology Solutions, Inc.)
Research Firm: Morpheus Research
Report URL: https://www.morpheus-research.com/figure/?ref=shortreport.fyi
Position Disclosure: Morpheus Research discloses a short position in Figure Technology Solutions. The firm stands to profit if the share price declines.

Thesis

Morpheus Research alleges Figure Technology Solutions is "an intricate blockchain-themed stock promotion hiding a conventional home equity lender with aggressive underwriting while insiders cash out." The following claims form the core of the report:

Filings vs. Public Claims: Figure executives told CNBC and investors that every loan is originated "end-to-end on the blockchain," but Figure's SEC filings state the loan origination system "does not rely on the use of blockchain technology" and that originations and ownership transfers use "traditional documentary processes." A former employee confirmed blockchain recording occurs only after funding.
Digital Twin Contradiction: Figure co-founder June Ou said tokenizing a real-world asset as a "digital twin" has "no point," and Cagney posted that loans on Provenance are "native, not digital twins." Figure's SEC filings explicitly describe its loans as digital twins — tokenized representations of real-world assets documented through traditional legal documents.
Spreadsheets Behind the Blockchain: Figure executives called spreadsheet-based collateral management "crazy" and claimed blockchain made such failures "impossible." KPMG Agreed-Upon Procedures reports for all 26 Figure securitizations from March 2023 to March 2026 show spreadsheets were used in every case, with file names including "External_v5" and "v3 (6)." A former employee said loan tapes were shared via email in spreadsheets with whole loan buyers.
Overstated Audit Efficiency: Cagney claimed blockchain enables AAA ratings with only 20% of loans audited, which Tannenbaum called "one of the clearest examples of blockchain adding value." A senior employee at competitor Achieve said the 20% level is set by rating agencies and underwriters, not blockchain. Achieve's December 2025 AAA securitization reviewed 19.4% of loans — with no blockchain claim.
Figure Connect Is Not Capital-Light: Tannenbaum described Figure Connect as a "pure marketplace" where Figure does not "touch" the loans. The report documents that of $486 million in cumulative Connect volume as of Q1 2025, only $260 million was transacted by third parties. Figure used $6.8 billion in cash to originate and purchase loans in 2025. Morningstar DBRS pre-sale reports show Figure acts as seller in all HELOC securitizations. A former employee said: "Figure was funding a lot of it, like a lot of it."
Sixth Street JV Underdelivered: A February 2025 joint venture with Sixth Street was announced to bring over $2 billion of liquidity to Figure Connect, with Sixth Street committing $200 million for 95% of the JV. By September 2025, the JV had purchased zero loans through Connect and instead spent $25 million on residual tranches from Figure's own securitizations. By December 2025, the JV had been funded with only $49.6 million. No renewal or update was disclosed after the 12-month initial term.
Stalled and Failed Blockchain Initiatives: Figure Equity Solutions/Adnales (2021) was meant to compete with Carta but generated no visible SEC activity until 2025. Figure Pay (2022), announced as a Banking-as-a-Service platform, appears wound down after reportedly failing to obtain a banking license. Figure Markets (2024), pitched as an exchange to rival Coinbase and Binance, ranked #106 on CoinDesk as of April 13, 2026, and generated no material revenue.
Democratized Prime Is Internally Supported: Cagney called Democratized Prime "THE killer app." The platform has 8 lending pools, and Figure's own two HELOC pools represent 94% of borrower demand. Figure paid an average 8.7% interest rate to borrow approximately $190 million through the platform in 2025, while conventional warehouse lines cost approximately 5.5% and had substantial unused capacity. Warehouse facilities fell from 65% of Figure's debt in 2024 to 3.86% in 2025 as Democratized Prime rose to 34%.
OPEN Platform Lost Its Own Shares: Figure listed 4.375 million of its own shares on the OPEN blockchain equity platform in early 2026. By the report date, only 690,295 remained on-chain — approximately 86% had been converted back to Nasdaq-traded shares. Daily trading volume had fallen to roughly $54,000, and 87% of remaining blockchain shares were concentrated in three accounts. No additional listings had been announced.
Aggressive Underwriting and Deteriorating Credit: Figure uses FICO 9 rather than industry-standard FICO 8, lends on second homes and investment properties (7.65% of its first 2026 securitization pool), and relies on AVMs rather than appraisals, with no title reports or title insurance. Morningstar DBRS described Figure's underwriting as "somewhat less rigorous than the full documentation standard." Delinquent loans held for sale rose from 3.91% in 2024 to 5.46% in 2025, while Bank of America's home equity delinquencies declined from 1.92% to 1.79% over the same period. Figure's 2024 vintage securitizations had nearly double the 90-plus day delinquency ratio of comparable Rocket Mortgage and Spring EQ securitizations.
Open-End Classification Risk: Figure funds HELOCs in as few as five days by classifying its product as open-end credit under TILA. Borrowers must draw the full balance at closing and can redraw only after paying down balances. A former employee said there was "a lot of scrutiny" around this because the full-draw requirement makes it "almost a closed-end product." Figure's prospectus warns that recharacterization as closed-end credit "would have a material adverse effect" on the business. NCUA guidance indicates closed-end seconds would trigger TRID's seven-day waiting period.
Provenance Is Not Independent: Figure describes Provenance as an "independent layer 1 blockchain" in its annual report, and a subsidiary prospectus states neither Figure nor affiliates participate in development or maintenance. Provenance's executive director is June Ou — Figure board member and Cagney's wife. Archived and current Provenance website and LinkedIn profiles show leadership composed of Figure employees since at least July 2025. Cagney used "we" in Provenance Telegram discussions and stated in October 2025 that Figure and Provenance together owned approximately 65% of HASH. Figure financed Provenance with a $5 million note in 2022, and on January 21, 2026, Figure took over execution of community directives for the Provenance Foundation.
Provenance Is Centralized: The report's analysis of Provenance Explorer found that two accounts controlling 38.7% of bonded HASH tokens could halt the network under CometBFT rules, and seven accounts controlling 68.1% could determine block creation. 47 active validators received at least 99% of their bonded tokens from what the report identifies as the foundation's delegation program. Excluding those delegations, 41 validators controlling 9.4% of voting power had an average total assets of $23 each.
Insider Selling While Promoting: The report alleges Cagney posted in March 2026 that a $30 share price was "goofy" and that he might buy, yet SEC filings show he sold $64.1 million in Figure stock since IPO at an average price of $28.50, with zero purchases. Tannenbaum sold $7.4 million in the IPO and an additional $45.4 million within 90 days after IPO using lock-up exceptions. The report also alleges Cagney pledged 2,042,014 Figure shares in April 2022 — worth approximately $70 million today — to Quid Capital Fund in a California UCC filing that Figure's S-1 does not disclose.

Notable Details

On March 1, 2026, Provenance Blockchain displayed $390 quadrillion of on-chain assets, largely tied to three assets including one linked to "K-R-O Brokers." Paxos fixed a comparable $300 trillion mint error within two hours. Much of Provenance's erroneous values remained visible nearly two weeks later with no acknowledgment from Figure or Provenance.
In 11% of the loan pool across Figure's last three HELOC securitizations, a secondary AVM did not support Figure's own AVM valuation within a 10% range — a Grade "C" result per third-party due diligence reports. Figure does not order title reports or require title insurance on these loans. A former employee described loans of $150,000–$200,000 being originated without a title policy and called the AVM reliance a "major flaw."
West Capital Lending salesperson Al Bennett — whom Figure described as a "longtime" partner and featured as a special guest on a Figure Sales Success Webinar — publicly described Figure HELOCs as: "no appraisal needed, no actual income docs needed… It's easy." Pre-approval, he said, takes "30 seconds to 2 minutes."
Cagney has promised a Coinbase listing for HASH since at least 2021. Coinbase's own website states listings generally take under 30 days. More than 100 days after Cagney said he was in diligent conversations with Coinbase, HASH still was not listed. As of April 16, 2026, HASH had three trading pairs total, less than $32,000 in 24-hour volume, and a price down 92% since its 2019 launch. Figure's financial statements value HASH at $0.00205 per token versus a trading price of $0.01181.
The report alleges Figure CFO Macrina Kgil served as CFO of GPB Capital from September 2016 to July 2018. The SEC charged GPB Capital in February 2021 with running a "Ponzi-like scheme" that raised over $1.7 billion and defrauded more than 10,000 investors. A 2019 class action complaint alleged Kgil was "instrumental" in executing the scheme. Figure's official bio for Kgil omits her GPB tenure entirely. The report notes Kgil herself was never charged.

"You always create the hype and sell the vision… he will sell you the vision of a Porsche when all we have is like a bicycle, and people buy into that."

— Former Figure employee, quoted in the Morpheus Research report, describing what they characterize as Mike Cagney's promotional playbook at Figure.

FAQs

Does Figure actually originate loans on the blockchain?

Figure executives, including CEO Michael Tannenbaum on the company's first public earnings call, stated that every loan across nearly 250 partners is originated end-to-end on blockchain without human involvement in the data. Figure's SEC filings state the opposite: the loan origination system "does not rely on the use of blockchain technology" and all originations and ownership transfers are recorded through "traditional documentary processes." A former employee told the report's author that blockchain recording occurs only after a loan is funded — not during origination.

Did Figure really use spreadsheets in its blockchain-based securitizations?

Figure executives criticized spreadsheet-based loan management and claimed blockchain made such practices obsolete. KPMG Agreed-Upon Procedures reports for all 26 Figure securitizations reviewed from March 2023 to March 2026 show spreadsheets were used in every case, with file names including "External_v5" and "v3 (6)" suggesting manual compilation and version tracking. A former employee also told the report's author that loan and collateral tapes were shared via email in spreadsheets with whole loan buyers.

Is Figure Connect actually a capital-light marketplace, as management claims?

Tannenbaum described Figure Connect as a "pure marketplace" where Figure does not "touch" the loans. Per Figure's August 2025 draft registration statement, of $486 million in cumulative Connect volume as of Q1 2025, only $260 million was transacted by third parties. Figure used $6.8 billion of cash to originate and purchase loans in 2025. Morningstar DBRS pre-sale reports show Figure acts as seller in all HELOC securitizations reviewed. A former employee said, "Figure was funding a lot of it, like a lot of it."

What happened to the Sixth Street joint venture that was supposed to bring $2 billion to Figure Connect?

In February 2025, Figure announced a joint venture with Sixth Street expected to bring over $2 billion of liquidity to Figure Connect, with Sixth Street committing $200 million for 95% of the JV. Per Figure's prospectus, as of September 2025 the JV had purchased zero loans through Connect and had instead spent $25 million purchasing residual tranches from Figure's own securitizations. By December 2025, the JV had been funded with only $49.6 million. The JV had a 12-month initial term, and the report says Figure disclosed no renewal or update after that term expired.

How is Figure's loan performance compared to competitors?

Figure's delinquent loans held for sale rose from 3.91% of balances in 2024 to 5.46% in 2025. Over the same period, Bank of America's home equity past-due and non-performing balances declined from 1.92% to 1.79%. Bloomberg data cited in the report shows Figure's 2024 vintage securitizations had nearly double the 90-plus day delinquency ratio of comparable Rocket Mortgage and Spring EQ securitizations. Morningstar DBRS described Figure's underwriting as "somewhat less rigorous than the full documentation standard."

Is the Provenance Blockchain actually independent from Figure?

Figure's annual report describes Provenance as an "independent layer 1 blockchain," and a subsidiary prospectus states neither Figure nor its affiliates participate in Provenance's development and maintenance. The report says Provenance's executive director is June Ou, who is also a Figure board member and Cagney's wife. Archived and current Provenance leadership profiles show Figure employees in key roles since at least July 2025. Cagney used "we" in Provenance Telegram discussions, stated that Figure and Provenance together owned approximately 65% of HASH as of October 2025, and Figure took over execution of community directives for the Provenance Foundation on January 21, 2026.

What does the Morpheus Research report say about insider selling at Figure?

The report alleges that Cagney posted on X in March 2026 that a $30 share price was "goofy" and suggested he might buy shares, yet SEC filings show he sold $64.1 million in Figure stock since the September 2025 IPO at an average price of $28.50, with zero purchases recorded. Tannenbaum sold $7.4 million in the IPO and an additional $45.4 million within 90 days after the IPO using exceptions to the 180-day lock-up. The report also alleges that Cagney pledged 2,042,014 Figure shares — worth approximately $70 million today — to Quid Capital Fund in a California UCC filing from April 2022 that Figure's S-1 does not disclose.

Disclaimer: This summary is not primary research and does not constitute investment advice. It is a brief overview of a detailed equity research report authored by the firm, organization, or source referenced in this article or at https://www.morpheus-research.com/figure/?ref=shortreport.fyi, which contains extensive evidence, regulatory filings, and analysis; readers are encouraged to review the full report there for a comprehensive understanding. The content provided in this publication is not authored or originated by us — we act solely as a distributor and do not endorse, verify, or take responsibility for the accuracy, completeness, or reliability of the information presented. This publication is for informational purposes only and should not be construed as legal, business, investment, or tax advice. Always conduct independent due diligence and consult qualified professionals before making any decisions based on the information contained herein. We disclaim all liability for any loss or damage arising from reliance on third-party content, and the views expressed are solely those of the respective source and do not necessarily reflect our own.