The @kontigo_app vs Checkbook & JP Morgan drama is pure 🍿. I wanted to give it some context. Because the claim of "banking system is evil and outdated" is simply wrong and lacks context. Here's what I think is really going on

JP Morgan closed accounts for crypto startups Kontigo and Blindpay The information reported that the account freezes were linked to business activity in high-risk regions, including Venezuela, and to gaps in customer identity checks. From Tradeweb: “JPMorgan acted after seeing rising disputed transactions and chargebacks tied to these accounts. The bank said the decision was based on risk controls, not opposition to stablecoins themselves.”

To understand this, there are a few things we need to unpack: 🧠 There are three players here. Checkbook, JP Morgan, and the start-ups themselves. - JPM banks Checkbook. - Checkbook "banks" Kontigo. - Kontigo serves the End User.

When the End User commits fraud, the loss travels up the chain. If Kontigo can't cover it, Checkbook pays. If Checkbook can't cover it, JPM pays. If JPM spots a sanctions violation. It nukes the whole thing.

🧠 A high volume of chargebacks can lead to a program manager (e.g., Checkbook) incurring penalties and ultimately being removed from a card network. So you’d expect the PSP (if they were the program manager) to exit a subprogram (such as Kontigo) if it were a risk.

🧠 The CEO of Kontigo points out that Checkbook was however not its on-ramp or cards partner. The CEO says Checkbook provided virtual accounts. My bet is this is confusing ACH returns as “chargebacks.” Or it could be that, while the “self-custodial” account funds the card, the card itself is still custodial and may be causing disputes and chargebacks.

🧠 A common fraud pattern: - Bad Actor links a stolen/fake US bank account to Kontigo (via Plaid or micro-deposits). - Bad Actor "pushes" money to their Kontigo Virtual Account via ACH. - Kontigo credits the ledger instantly (or T+1). - Bad Actor swaps to USDC and withdraws to a self-custodial wallet (irreversible). - The US Bank sends an ACH Return (Insufficient Funds or Unauthorized) 2–3 days later. - Checkbook (and JPM) are left holding the negative balance. High ACH return rates (unauthorized returns > 0.5%) are a "kill switch" metric for banks.

🧠 Self-custodial cards are low-friction, easy to open, and ideal for this kind of fraud. It’s entirely possible that Checkbook (as a virtual card provider) saw this and had a fiduciary obligation to stop it. It’s also entirely possible that the CEO is right, and this was simple de-risking, leaving a start-up out in the cold.

🧠 For a bank like JPM, Venezuela is radioactive. It’s entirely possible JP Morgan’s AML system saw transactions to Venezuela, a sanctioned country, and issued a close order. As a bank, it’s better to be safe than sorry (see the history of multi-billion dollar fines for sanctions violations). If Kontigo is marketing specifically to Venezuelans (which they appear to do), JPM might view the entire program as a sanctions evasion vehicle.

🧠 The Kontingo CEO argues that Checkbook repeatedly assured Kontingo they could offer global accounts “including Venezuelan migrants, as long as they passed the KYC/KYB process.” Reports suggest Kontigo’s US Terms of Service prohibited Venezuelan users, but their marketing (and reality) targeted them. There’s a disconnect here.

🧠 The tension here is between banks not wanting to be fined, PSPs trying to enforce the rules, and start-ups who may not understand the challenges their suppliers face. You can't simply claim the banking system is out of date if you don't understand why these things exist.

Don't get me wrong. There's plenty that we need to update about the banking system. But when you scream evil banks, you look naive. There isn't a crowd of other crypto projects or firms backing this start-up. Their silence is deafening

100% personal opinions, and industry context. I haven't spoken to any of the people involved.