Escheatment Primer + Innovation with Aisen CEO Allen Osgood

What if every dormant account in your fintech is a ticking compliance clock — and you didn't know the timer started three years ago?

Host Reggie Young sits down with Allen Osgood, CEO and co-founder of Eisen, the company modernising escheatment — the process by which dormant accounts and abandoned funds get transferred to state governments. It's an obscure corner of financial compliance that touches every bank, fintech, brokerage, and increasingly every crypto platform. More than one in seven Americans has money sitting in state hands because of it, with over $80 billion held by state governments at any given time.

Allen and Reggie cover what escheatment actually is and why it matters, the wild story of a retiree who planned his retirement around an Amazon investment — only to find the state of Delaware had liquidated it. They dig into why crypto is about to smash headfirst into dormancy periods nobody planned for, why the 'deal with it later' mindset is a trap that hits three years faster than founders expect, and how proactive compliance can flip a cost centre into a retention engine.

Transcript

Reggie Young: Welcome back to Fintech Layer Cake, where we uncover secret recipes and practical insights from fintech leaders and experts. I'm your host, Reggie Young, chief of staff at Lithic. On today's episode, I chat with Allen Osgood, the CEO and founder of Eisen. Eisen is an escheatment platform, and if you've never heard of escheatment before, that's okay. That's normal. It's an under-discussed but important process for dealing with dormant funds. And this whole episode is about demystifying escheatment. We cover the basics as well as why it needs to be modernized. Crypto, for example, is creating a whole new set of headaches for banks, fintechs, and states.

Fintech Layer Cake is powered by the card issuing platform, Lithic. We provide financial infrastructure that enables teams to build better payments products for consumers and businesses. Nothing in this podcast should be construed as legal or financial advice. If you enjoy Fintech Layer Cake, please give it a review on Apple, Spotify, or wherever you listen.

Allen, welcome to the podcast. Excited for our topic today. It is a very underappreciated area of fintech and the banking ecosystem. Excited to demystify escheatment today. It’s a pretty obscure concept that I don't think most people in fintech could define. They may have a rough understanding, but they probably can't explain what it actually is. If you're at a dinner party and somebody's talking to you and they say, oh, what do you do? Oh, I'm running Eisen. What does that do? Escheatment. What's your answer to what the hell is escheatment? Because it's not an everyday word.

Allen Osgood: Totally. I've always been fascinated by the fact that the word cheat is in escheatment. E-S-C-H-E-A-T-M-E-N-T. Escheatment is the process by which dormant accounts, abandoned funds, every gift card, fintech wallet, CD, bank account, crypto wallet, anything where you have funds, whether you're holding them there intentionally or unintentionally, that goes typically between three to five years of inactivity, is going to get sent to the state. People broadly refer to this as the lost and found of finance.

It might be an obscure concept, but more than one in seven Americans has money being held by a state for them. North of $80 billion are being held by state governments. And so the state governments earn the interest on those funds. They use them to fund special projects, like the Cleveland Browns Stadium in Ohio. This type of what started as a consumer protection regime of customers give money to the company through whatever reason of death or forgetfulness, they then are forced by state laws to give money to the state, and then the state is supposed to return those funds to customers. But CBS just did a great investigation into California's return, and it has about 3.5% of the billions and billions of dollars they've ever collected from companies actually returned to people.

So what you have is a triangle with one missing part due to all sorts of interesting political influences, treasurers filling budget gaps, et cetera. Where we fit in is we help companies comply with the state-by-state maze of escheatment rules, which checking account dormancy period applies, or payroll dormancy or gift card dormancy. What are you required to do? Typically send physical mail for most of these customers, which all of our digital friends typically look at and think is ridiculous. But the state laws require a variety of different things on timelines around the year. Follow the requirements, identify the accounts, process them through the operational layer, and then ultimately report and remit those things to the states.

Now that is a massive transfer of wealth out of the places where customers put them to the state. Our goal is not necessarily to facilitate more escheatment. It's actually to facilitate less escheatment. And so if we're able to get ahead of the timelines and let those companies know beforehand, that's really where you can start to actually reunite people with their money.

Reggie Young: If listeners are curious for more, obviously we're talking a lot more about escheatment at this podcast, but I think it's a Planet Money episode at some point in the past few years on escheatment.

Allen Osgood: Yeah, it's Walter Schramm’s story. This guy, Walter, did what we all are taught to do. He bought Amazon in the ‘90s, thought he had a great investment, and like Warren Buffett style, just decided to let it go up. It was an E-Trade account actually. Went to retire in 2018, because he'd been tracking the spreadsheet, planned his retirement around this lottery of an investment. Amazon from 1990s till 2018 did phenomenally, but it turns out, set it and forget it, it's a terrible idea when escheatment’s involved. He'd actually escheated and liquidated in 2008. And what was supposed to be hundreds of thousands of dollars, he was told to pick up for a two grand profit, and he sued everybody. He sued the state of Delaware. He sued E-Trade. He sued Morgan Stanley. And he lost all the cases. But I think it's like a five-year recurring episode on Planet Money at this point.

The craziest thing is I just met a woman who had the same thing happen to her, Amazon shares, also at E-Trade. Her name is Vicki Wilson. She's been publishing about it on LinkedIn. Fifteen, twenty years later, to have the same thing happen with the same shares for the same company with a different person, that's when you know it's not necessarily the person or even the company's fault. That's when it's actually ultimately the systems.

Reggie Young: Yeah, they're such crazy stories. Be curious to talk a little bit about how you ended up deciding that escheatment was the thing to solve. You came out of Coinbase doing product work and then co-founded a compliance automation company. That's not the most obvious path. What drew you towards this generally considered unsexy area of financial services?

Allen Osgood: I've always really liked complicated things. When I was at Coinbase, I was the payments PM. I did our bank integrations and fiat movement, basically all fiat on and off the exchange came through my team. And so we were moving billions of dollars through everything, from ACH, to Fedwire, to faster payments, to SWIFT, and I really enjoyed that. But when you're in that seat, you end up being way too familiar with the 300 pages of compliance documents you submit to the bank to get those accounts.

Towards the end of my time there, I heard some crazy stories about us liquidating hundreds of millions of dollars of people's bank accounts, like crypto, Coinbase wallets. And I just thought that was nuts. Why are we doing this? You spend so much time to acquire customers, nurturing relationship, and churn is natural. It's part of the account life cycle. Why are we taking some of these Bitcoin that they gave us in 2017 and liquidating it in 2020? That's insanity. But that was the state laws, and that still is the state laws.

When I was thinking about Eisen, I'd known the problem was around, but then you start to hear the Walter Schramm story and you're like, oh, this really messes people up. One of the things that I think this is more recent than the original founding here, but you see securities playing out in crypto all over again. Securities of taking an asset, liquidating it, and freezing the value with the cash equivalent has been plaguing people like Walter for decades. Crypto is just now smashing into the dormancy periods based on when adoption took off. And so the six or seven states right now have active legislation to explicitly require a liquidating crypto. It's the mass majority of what happens across the country. California this year is the first time that crypto is actually reportable and escheatable.

It's this wave of bad that's coming through all of these things that, sure, something needs to happen to forgotten money. But if I think about the things I've forgotten about for three years that I still care about and don't want you to liquidate underneath me, that's the majority of things.

Reggie Young: Yeah, it's such a wild problem. What normally catches companies off guard about escheatment? We've talked about the Walter story of as an individual, but thinking for a company that has to deal with it, what surprises companies about escheatment?

Allen Osgood: Usually, the combination of, when do I have to start doing this? It's the perfect example of a deal-with-it-later problem. I'm getting started. I'm growing my business. I don't have that many users yet. I'm a fintech that's just getting ramped up, let's say a sponsor bank. I launched a debit card program. I'm starting to grow adoption. I'm starting to grow volume. Escheatment’s in the corporate policies. We have compliance policies. We have to tell the bank about we comply with state laws, we'll deal with this later. But the dormancy periods are three years. So later is not that long.

And so what ends up happening is people get whacked with these fines, penalties, and interests for past due reporting. The first thing we do for any of our even prospects is take an anonymous set of data, run it through the analysis, and tell you what your escheatment picture looks like. It's that type of systematic approach to these kinds of complex compliance things that I think being able to see it helps a lot, because then you can make better decisions. Every different state in the US and 44 different countries around the world have escheatment rules. As you go through and try to map that complexity out for I can deal with this later problem, it's the tension of, at some point, it's actually really hard.

Reggie Young: Yep. There's so much variation, just being able to see that bird's eye view of it. There's so much variation, how many years, different rules for, is it a prepaid card? Is it a bank account? Is it an insurance payment? All that stuff is just the Byzantine.

Allen Osgood: Some states where prepaid cards aren't escheatable at all. So now you're into breakage territory and how do I recognize those things as revenue. Navigating that messiness, I think, is where we saw pretty clear opportunity. The deeper we've gotten into it, the more we've realized how many things feed into escheatment.

One of the things most people don't know is that there's specific account statuses that protect you from escheatment, one of them being active duty military. If you're active duty and deployed, you're protected by a set of rules called the Service Member Civil Relief Act, the SCRA. In Michigan, I'm sure you know this, their deadline for filing is July 1st. For a regular holder of a bank account or something, it's three years. But if you're on active duty military, it's five years. And so there's states starting to add in layers of protection for vulnerable populations to extend the dormancy period, to give those people a chance to actually reactivate and retain their funds.

But what we're seeing is that most people, A, aren't deep enough in the problem to know that they should be checking for these things, and even when they are, have huge amounts of operational pain actually going through and seeing across all of our Michigan accounts, or whichever state it applies to, who actually qualifies for this. And so the ability to be able to plug in and have the solution that does that right out of the gate is part of the value prop.

Reggie Young: Yeah. There have been, inevitably in fintech, some fintechs take off. Some fail. Some wind down involuntarily or otherwise. The card program is a biased Lithic point of view. But any fintech that's winding down their program, who's on the hook for escheatment? What's that sort of conversation or process look like between the bank and fintech?

Allen Osgood: We've been fortunate to build really good relationships with a bunch of the sponsor banks, some of the ones we've announced here, Sutton, Blue Ridge, and a bunch of others. At the end of the day, it should be the fintech, but some of these things melt down messy. When they melt down messy, it's ultimately the bank who's going to be supporting those customers. The process of going from I'm using my app to log into my account to the app and company is dead, and now my funds are at the bank with no way to get them out, just causes so much consumer friction and harm in that middle tier.

One of the things we did when Synapse collapsed was start to support some of the banks underneath that and returning funds back to customers. We put out a case study about our work with Lineage Bank. And so the ability to issue refunds back to people as disbursements, the ability to track whether or not they cash those, and then escheat the rest of them, that part of this takes multiple years of tracking to let those things hit their dormancy periods. And by the time you hit a dormancy period, two or three years later, in that scenario, the team's probably turned over twice. And so meltdowns at the fintech level cause churn there.

Sometimes it's a meltdown at the bank level that causes a ton of churn there. But at the end of the day, it's consumers’ funds that need to get back to them, whether it's sent directly back to the consumer via check and taken, or whether it's through the escheatment process where they can go, them or someone, one of their descendants can pick it up from the state. All of it is just coordinating a mess.

Reggie Young: Yeah. Listeners can probably now appreciate some of the messiness of some of the meltdowns that have happened around what funds are at which bank attributable to which end users. You got that. And then on top of it, you've got the escheatment layer of like, how does this all apply? How do we deal with all the state variations and nuances there?

You're talking a little bit about crypto and some of the trends there and some of the legislation there, which is fascinating. It introduces operational and different legal challenges that traditional escheatment frameworks weren't really designed for. Price volatility, for example, being a good one. Let's dig into that. You were mentioning the states. How are states starting to deal with crypto tactically?

Allen Osgood: We typically see states fall into four categories here. One is do nothing. They say nothing, they publish nothing, they leave it entirely to your own devices. That's a bunch. Then you see people start to publish regulation. Here's what we think the rules are with no statutory changes. Then you start to see statute, which says, please liquidate this, because operationally, the states don't know how to hold crypto. And so the challenge is, how does the state receive and then send and process and store custody? All the verbs that we're familiar with in crypto land is brand-new territory for a lot of these state treasury functions who are tasked with holding these assets.

Liquidation is the most common of the things that plays out. And then increasingly, there's some states, and I'm very grateful for them for doing this, who are taking assets in kind. Like Arizona, California, a couple of these states, their statute says, take it in kind and hold it for the customer. Now, the states don't yet have a fully functional built-out process for this yet. So what is happening in state treasurer land is a rapid rush to learn how crypto works, how to operationalize this legislation that's been passed. But I think that's a better outcome for consumers.

The challenge is the states are still going to liquidate you somewhere between 12 and 24 months after it's been submitted to them. So it prolongs the period you can get the asset back, but they're still not custodying it forever. In Walter's scenario, E-Trade sent shares of Amazon to Delaware, but Delaware liquidates them after a pretty short period of time. And so they received it in kind, but it's still in their interest and operational simplicity to go through and convert that to cash where they can then start to turn interest and standardize the way they hold it.

Reggie Young: Yeah. In some ways, I guess it's a good forcing function. Dealing with crypto in kind, escheatment is a good forcing function for the industry to modernize. I know Eisen's leading that charge in modernizing escheatment.

Allen Osgood: It's two things that don't typically go next to each other. Modernize escheatment is still like moniker. I think the challenge is, when you get into crypto, there's no threshold for escheatment. Every dust or airdrop or bonding reward, or incentive that gets sent out, potentially creates an escheatable account. In this case, it'd be a crypto address.

One of the interesting things that California did is they implemented escheatment rules and legislation that make custodial crypto reportable. But if you have any part of a private key, you also now have a duty to go try and demonstrate that you tried to reach out to the other owners of that private key to then escheat the assets. Well, if you have part of the key, you're going to ultimately have compliance and legal responsibilities. So you think about Privy or something like that on the Stripe side, where you're mostly non-custodial, but you can help people reset their password, you're going to end up running into these weird quirks of states not fully understanding how these things play out but then legislating all the way through. That's going to be the next chapter of this as this continues.

Reggie Young: Yeah. The wallet key problem, that's fascinating. What does escheatment look like? I've talked to banks that manage escheatment themselves. I know there's some incumbent escheatment solutions out there. What do you see as the big differences between- as we were just talking about, your modernizing escheatment towards don't normally go together. But what do you see as making up the substance of how you're helping modernize the problem?

Allen Osgood: Most of what we come into is either a team that knows they need to be doing escheatment but haven't been, a team that's wildly overwhelmed tracking everything in their spreadsheet, or somebody who's typically working with a consulting vendor. So we'll typically compete with a big four or similar kind of boutique firms.

One of the biggest unlocks for us has been, instead of you sending me a huge mountain of data in Excel sheets once or twice a year, which is typically what existing vendors do, we set up direct integrations with our clients where we're able to constantly be getting updates to the balances, the activity dates, all the things that let us tell you what is your escheatment risk for every single account on a rolling basis. And so instead of you sending me a pile of accounts and me filtering out the ones that aren't escheatable and saying, here you go, you need a continuously refreshed version of that so that you can be proactive about reactivating those people. And so the best escheatment is no escheatment.

If you know that somebody's going to go dormant and be escheated 6 or 12 months from now, the best thing you can do is reach out to them, look up a new address, find a new email, make a phone call, go through your top 10 by value and go the extra mile for them. But usually, there's such a reactive stance for how escheatment compliance is done. It's, oh, those are lost accounts.

Our retention rate’s north of a third when we go through and get proactive with these places. So we're saving millions and millions of dollars that get to stay with the institutions, earning that interest margin, keeping the account in brokerage, keeping the account fees ticking. But it's also keeping the client assets where they put them and not terminating the customer relationship.

When we started the business, we thought, oh, if we automate the rules and tell people what's going to happen, of course, they're going to do all of these things. That's just not really how it's played out. It's making sure you protect the institution from states will audit you and you incur fines, penalties, and interests about 10% a year for underreported assets. So ignoring it is costly and leads to massive audits, but doing it well also pisses off your customers. So stepping into a no-win scenario where the best answer is figuring out a way to prove that this customer had contact. You just need an email, a login, any record of contact with that person, and you reset the dormancy clock entire.

Reggie Young: That's such a good example of compliance isn't just a cost center. It's keeping assets at the bank but earning more interest margin, all that sort of stuff. Compliance is important. It keeps your customers happy, but all the account holders happier because their assets aren't initiated. I love that reframe of the best escheatment is no escheatment. It's actually the meta problem that you're trying to help solve.

Allen Osgood: A lot of that has to do with, if you trace back where your escheatment come from, like, why is this even a thing, it's a ye olde English concept of the crown will bestow property upon you. If you abandon it, it will revert to the crown.

Now, if you have a king or a fiefdom, sure, that might work out. When you have 54 different jurisdictions in the US where you have these rules, all the states, plus four territories, DC, Puerto Rico, Virgin Islands, and Guam, managing the Guam escheatment rules is just not in your bankers operating handbook. That's not something most people know how to do. But the second you have a customer move to Guam or Hawaii, or if you're a bank in, say, the Midwest with branches in three states, if you want to keep customers when they move states, the second one of those goes dormant in a new state, you now have Florida compliance problems, Oregon compliance problems, etc. It's based on the address of the customer.

And so where we found ourselves to be quite helpful is when people, whether intentionally or not, end up with a nationwide footprint for a ton of customers with a bunch of assets. Those three combinations of things are just extremely difficult for most teams to manage.

Reggie Young: Yeah, that's unintended obligations for sure. We talked a little bit about banks, and you mentioned helping Lineage in some of their distributions. But what's your typical customer otherwise? You work both with banks, with fintechs. I know Eisen's supporting a lot of types of customers. So tell me a little bit more about that.

Allen Osgood: We broadly think of five primary fits within our financial institutions area. We have a large number of bank customers with really broad typically retail customer footprints, but also business customers. We work with Ramp, Rho, and a bunch of primary business banking, fintechs, and institutions. Banks are a big one.

Credit unions are a huge one here. We've announced some of these but more to come. Brokerages, when you have a brokerage account, a retirement account, an IRA, anything like that can also be escheated. Fintech, which is really where we started, and that was a lot of my background and where we kind of cut our teeth, and then increasingly crypto. As more of these crypto institutions come to scale with millions of customers, mature compliance processes, and smack dab into brand-new state regulation, it is just creating a wave of messiness that we can help clean up. Those are our five primary areas.

Interestingly, we've seen a couple of places that I didn't really expect to come in. Healthcare was a big one on patient refunds that don't get cashed. Telecom, in terms of payments to people or refunds, have come in. Insurance was a big one, where claims payments that don't get cashed. Anything where you have failed payments ended up being a big surprise. And so when you think about everybody's becoming a fintech company, if, for whatever reason, you can't pay out your Uber wallet, your DoorDash, Dasher credit, all of those types of things also end up very unintentionally triggering the state escheatment laws, and the states are waking up to it.

And so a lot of tech is going through these, like, who is this auditor telling us we have to do what? Those wakeup calls are, while unpleasant, I think the direction and natural consequence at the end of everybody's fintech life cycle. Yeah, you are, and here's the things you got to do.

Reggie Young: Yep. That's funny. I searched my own name in the California escheatment database two years ago, and I had one thing and it was a utility payback. I forget the circumstances. But yeah, that exact situation.

Allen Osgood: California has their website. There's also, just a plug for everybody listening, go to missingmoney.com. You can search 40-something different states, or you can put your name in and it'll tell you if you have funds. That is the, what I would say, state's attempt to give you back your money, is a website where you can search your name. Hopefully, there's not too many Reggies that match with the addresses you've been at. We've had some folks, your John Smiths of the world, with just a million results.

So it's simultaneously helpful and interesting, but also crazy PII leak, where you can search anybody's name, find their addresses, find the money owed to them. My whole thesis is that there's got to be a better way to do this. And that kind of thing we're playing out with the businesses, how can you get money back to people before it actually gets escheated in the first place, the best time to do it is before it ends up at the state where you're then arguing with identity and KYC, KYC-ing yourself with some state treasury person whose job is to make sure that they're not passing out free money to the fraudulent actors.

Reggie Young: That's crazy. I hadn't thought about the PII angle. I remember having to dig up some proof that I was owed that just took me months to find. So not an easy process.

Allen Osgood: These schemes are wildly underwater. That is a free money on the internet problem, which is one of the most well-exploited and fraudulently attacked areas out there. But there are really good success stories. I'm not going to paint total doom and gloom here. This does help people. There's a couple of websites, reclaim.org, I think, is one of the best of these, that there's places that will help you navigate this process if you'd like them to, to go search the state databases that can search your name and help you navigate that mess.

You hear about some people's lives being changed about life insurance payout that was from an estranged parent that they didn't know that ended up totally reshaping the opportunity for them to go to college. It was one that came out of Florida a couple years ago. Those types of things are, I think, rarer than they should be. Ultimately, that's the intent of the system working well. It's just very often barbelled with the Walter stories of somebody's retirement savings getting crushed.

Reggie Young: So if listeners take one thing away from this podcast, it's to go look yourself up in the escheatment databases. Honestly, I feel like when I talk to people who've done this, it's 50/50. One out of every two people ends up finding that they have a decent chunk of money sitting with a state somewhere.

Allen Osgood: Someone found 10 grand while sitting at dinner the other night. And I was like, you're welcome. That's the kind of thing where you're just through life. Ten, twenty years ago, when we had one or two bank accounts at our local community bank down the street, this wouldn't have been that big of a problem. But the kind of fractalization of our financial lives has really created way more surface area for escheatment to actually take our money than we would have had previously.

Reggie Young: Yeah, it's a crazy problem. For my wrap-up question today, what's one thing you wish more fintech founders understood about compliance that would save them pain down the road? Obviously, escheatment, go talk to Eisen. But what other things do you wish founders understood?

Allen Osgood: That's a great question. I think the self-serving answer here is start early, because then you don't end up with a huge problem on your hand to sort things out later. Ask your friends who they're using for things. Typically, the best vendors are pretty well known in the space and talked around. Most people in fintech want to help you. They want to help you comply with things. There's a couple of great firms out there, your FS Vector or others, that will help you manage your compliance processes and put those in place. But one of the largest things is being able to build out who's in your corner to help you with things is super important.

Usually, compliance is designed with good intent and executed to the best of people's ability, which isn't always enough. The intent is generally good. Compliance isn't something to fight. But finding a way to do it in a streamlined automated way, whether it's escheatment or card issuing or anything else, there's a lot of places that are designed to help the good thing get done better. That's really where the fintech and compliance ecosystem can start to support each other.

Reggie Young: Yeah. A lot of founders and operators want to focus on their business, not on escheatment or other problems. And so good to outsource all that stuff.

Allen Osgood: And it's what is your zone of genius and stay focused on it. It's one of those things where even in an era of we can Claude Code anything, it's what should we be Claude Coding? What is your ROI of the marginal token spend? Is it on building out a bunch of vibe coded compliance stuff? Go for it, but good luck when the auditor shows up. Or is it using some of these things that have been tried and tested throughout the ecosystem? I think, at least from the conversations we've had, there's a lot of like, when you can build anything, what do you build, and keeping that just more business advice than anything on the thing that makes you uniquely different as opposed to rebuilding or restructuring infrastructure from scratch.

Reggie Young: Yep, definitely. If listeners want to find out more, the site is witheisen.com. Go check it out. If you have escheatment needs, or don't want to escheat at all because you're going to notify everybody in advance and not have to deal with escheatment.

Allen Osgood: There we go.

Reggie Young: Awesome. Allen, thanks for coming on. This has been a great conversation and has hopefully demystified escheatment for listeners.

Allen Osgood: Welcome to the last corner of the fintech life cycle.