Michael Tannenbaum, CEO of Figure (NASDAQ:FIGR), has recently noted that Tricolor bankruptcy made headlines and for “good reason.” The Texas-headquartered auto lender had allegedly “double-pledged” hundreds of millions of dollars in car loans to various banks like JPMorgan and Fifth Third. What appeared to be a liquidity issue actually turned out to be “something far worse: a data integrity problem.”
Michael Tannenbaum of Figure explained in a blog post the system “couldn’t tell who actually owned what.”
He pointed out that this is a reminder that even in 2025, much of finance continues to operates on what may be referred to as the “honor system.”
At Figure, they claim to have been getting calls from warehouse lenders, law firms, and investors asking if this could this have happened on their platform.
According to the firm, the answer is simple: no.
As explained in the update, the Tricolor situation exposed “what happens when transaction execution and asset ownership reporting are disconnected.”
A system like MERS, which the mortgage industry has relied on, “reflects what members report.”
It is not actually integrated into any transaction execution system, “meaning it can’t verify the data.”
Reporting loan pledges is not actually required.
Meanwhile, Figure’s ecosystem was “purpose-built” to work differently.
Tannenbaum added that when a loan is registered on their system, it’s represented as a “token” on the Provenance Blockchain.
Figure claims that it has “perfected the lien, and any subsequent transaction involving that loan is verified on-chain, offering no opportunity for double pledging due to accident, malfeasance, or otherwise.”
Tannenbaum also mentioned that transactions are executed through Figure Portfolio Manager, which is their on-chain transaction platform.
And both sides of a deal — “the buyer and the seller, or the pledgor and the pledgee — see the same ledger.”
The system automatically “records and verifies transactions in real time.”
There’s no “honor system” here, Tannenbaum clarified.
He further explained that if a transaction isn’t reflected on the blockchain, it’s void ab initio (Latin for “never happened”).
Their DART (Digital Asset Registration Technologies) system then reads directly “from the blockchain to update lien holders automatically. It’s relying on cryptographic truth, rather than self-reporting.”
And once a loan is pledged, DART applies a digital padlock — which is described as “a cryptographic mechanism that prevents the loan from being sold, transferred, or re-pledged without the pledgee’s permission.”
In the wake of Tricolor, a banking partner had carried out a full audit of all the collateral they “hold on their books.”
For assets not on the Figure platform, such an audit reportedly takes “several weeks.”
For assets on the Figure platform, the audit “was completed in minutes if not seconds. Because in their world, ownership isn’t reconstructed after the fact — it’s visible immediately, immutable, and auditable by design.”
Their ecosystem makes double pledging “impossible,” not simply because people suddenly “behave better,” but because the underlying technology makes it “structurally impossible to do otherwise.”
Tannenbaum added:
“The Tricolor bankruptcy wasn’t about one bad actor — it was about an outdated infrastructure that depends on good faith rather than verified execution. It’s the same infrastructure that makes settlement slow, reconciliation expensive, and transparency optional.”
The Figure ecosystem — from Portfolio Manager to DART — “replaces that opacity with clarity.”
He also mentioned:
“Where MERS tracks after the fact, we record as it happens. Where traditional systems ask participants to report, we require participants to prove. That’s the difference between bookkeeping and blockchain. It’s the difference between trust and truth. Finance doesn’t need more complexity; it needs immutability.”
Tannenbaum concluded that the institutions that move first toward blockchain-based infrastructure won’t just “avoid the next Tricolor,” they could potentially play a role in “defining the next era of capital markets.”