The two SoFi board members who funded Mr. Cagney’s new company were David Chao of DCM Ventures and Steve Anderson of Baseline Ventures. They have both left SoFi’s board.
Mr. Anderson did not respond to requests for comment. In a statement, Mr. Chao, who has joined Figure’s board, said he had pressed Mr. Cagney on what he would do differently and was convinced that the entrepreneur was creating a workplace “where all employees are being heard and treated fairly, period.” He added, “We believe that he genuinely learned from his mistakes.”
There is no clear agreement on how businesses should think about reinstating people after sexual misconduct, and each case presents its own complexities. But Joan C. Williams, a professor at the University of California Hastings’ College of the Law, said the investors who funded Mr. Cagney’s new company despite being aware of his past problems were taking a big risk.
“Should someone who just created an incredibly hostile work environment, and lied to his board, after doing what he had explicitly promised not to do, be hired as a C.E.O.?” Ms. Williams said. “It doesn’t seem like a close one to me.”
Mr. Cagney helped found Social Finance in 2011 to refinance student loans online. The start-up grew rapidly and has gained a valuation of more than $4 billion, providing big returns on paper for his early investors.
A year into SoFi’s life, the company’s board learned about Mr. Cagney’s personal behavior. In 2012, the board settled with an executive assistant who had received sexually explicit text messages from Mr. Cagney, The New York Times previously reported.
The board learned separately that Mr. Cagney was in a relationship at that time with a woman in SoFi’s marketing department, said the people briefed on the deliberations, who declined to be identified because the details are confidential.
After Mr. Cagney acknowledged the relationship with the woman in the marketing department, he promised the board he would not do anything like it again, three of the people said. The agreement was referred to by some employees as Mr. Cagney’s “fidelity pledge.”
Several former SoFi employees told the Times last year that the board’s actions around the settlement did not prevent the spread of a toxic culture in the company. Last year, SoFi’s board started an internal investigation after a lawsuit from former employees alleged sexual harassment was pervasive at the company’s satellite office north of San Francisco. The investigation was conducted by the law firm Sullivan & Cromwell.
As part of the investigation, Mr. Cagney’s behavior quickly came under scrutiny. At the time, he denied to board members and staff that he was in an intimate relationship at the company with anyone other than his wife, who also worked at SoFi, the people familiar with the proceedings said.
Mr. Cagney reversed himself after Sullivan & Cromwell told the board there was ample evidence — in emails, hotel receipts and the manifests of private jet flights — that he had used company resources to pursue a romantic relationship with an employee, the people said. Mr. Cagney said he had previously suggested that employee as a promising candidate for chief financial officer.
SoFi has since settled the lawsuit about the satellite office. Mr. Cagney said on Friday that he took responsibility for a “get-it-done culture” that had led to some “untenable circumstances.” He added that he lied to the board “to protect the people involved.”
After Mr. Cagney’s exit, it took SoFi several months to find its footing. The company hired a new chief executive, Anthony Noto, this year. It recently added two women to its board. SoFi also instituted an ethics policy that explicitly prohibits intimate relationships between supervisors and subordinates.
Mr. Cagney returned more quickly. Within weeks of leaving SoFi, he began talking to SoFi employees about a new company, two people who met with him said. When he hired former employees, SoFi sent him letters asking him to cease and desist.
Mr. Cagney denied on Friday that he had recruited any current employees at SoFi.