Figure Technology Solutions Inc., a fintech firm with a reported valuation of $7.7 billion, is the subject of fresh accusations from short seller Morpheus Research that it exaggerated the role of blockchain within its home equity lending business.
The research note, published Thursday, contends that Figure does not in fact originate loans on-chain despite public messaging that suggested otherwise. The report highlights language from Figure’s own SEC disclosures which state that its Loan Origination System - or LOS - "does not rely on the use of blockchain technology" and that "all asset originations and transfers of ownership in our LOS are recorded through traditional documentary processes."
Morpheus Research further describes Figure’s LOS as reliant on familiar third-party services, naming CoreLogic for property valuation inputs and Plaid for income verification. The report characterizes this setup as similar to other digital HELOC lenders that use established vendor tools rather than true end-to-end blockchain origination.
Former staff members cited by Morpheus told the research firm they were under the impression loan activity was occurring fully on-chain before joining the company, only to find the operational reality different. One former employee is quoted saying,
"Prior to joining Figure, I was convinced that everything was happening on-chain, like beginning to end. And that’s not the reality."
The report notes an apparent tension between public statements and SEC filings regarding the nature of the company’s loan instruments. While Figure has described loans as "digital twins" or "tokenized" representations, those same filings clarify they are representations of real-world assets "as documented through traditional legal documents." Morpheus points out that this characterization stands in contrast to comments by co-founder Mike Cagney, who the report says has criticized the use of tokens and digital twins on social media.
Morpheus Research also raises questions about loan performance. According to the report, delinquent balances on loans held for sale rose from 3.91% in 2024 to 5.46% in 2025. The research team analyzed 2024-vintage securitization deals and found that more-than-90-day delinquencies in Figure’s pools were double those seen in comparable pools from Rocket Mortgage and Spring EQ, as reported in the note.
On the blockchain and product front, Morpheus asserts that several Figure initiatives - including Figure Connect, Democratized Prime, and YLDS - have not attracted meaningful third-party engagement. The note states that 99% of YLDS was owned by Figure and a single passive investor at the end of 2025.
Governance and independence of Figure-linked blockchain projects also come under scrutiny. The report challenges the independence of Provenance Blockchain, described by Figure as an "independent Layer 1 blockchain," and states that more than 65% of Provenance’s native governance token was owned by Figure, its affiliates, and Mike Cagney.
Separately, Morpheus calculates that Cagney has sold $64 million worth of Figure stock since the IPO at an average price of $28.50, and that he has not reported any purchases of the stock in that period. The firm disclosed that it holds short positions in Figure Technologies.
The report presents these items - public statements, SEC disclosures, operational vendor use, loan performance metrics, token ownership concentration, and insider sales - as the basis for its conclusions and investment position.