SAN FRANCISCO — Last September, the board of the online lending company Social Finance ousted its chief executive, Mike Cagney, after questions about sexual misconduct.
The move was prompted by a board investigation that found Mr. Cagney was romantically involved with an employee, even though he had previously told directors that he was not involved in any extramarital workplace relationships, said four people with knowledge of the deliberations. Years earlier, Mr. Cagney had also promised the board he would not have affairs with employees after they learned of another relationship, said the people.
Yet just months after Mr. Cagney departed SoFi, two venture capitalists who had been on the company’s board and knew many details of his actions invested $17 million in his new start-up, called Figure. Since then, Mr. Cagney has raised another $41 million from others for the lending start-up, which will open soon.
Mr. Cagney’s swift comeback — from ouster to new company took four months — provides one of the starkest illustrations of the speed with which the technology industry is moving past the sexual harassment allegations that swept Silicon Valley and many other industries over the last year.
Apart from Mr. Cagney, 47, other Silicon Valley entrepreneurs and investors who lost their jobs in the #MeToo movement are also rebounding. Steve Jurvetson, an investor who left his venture firm DFJ last fall amid an investigation into inappropriate workplace conduct, is back with a new investment fund. And Justin Caldbeck, another venture capitalist, has resurfaced giving public talks about what he learned from grappling with sexual harassment claims.
Their resurgence is being enabled by Silicon Valley’s start-up ecosystem, where money is plentiful and many are eager to bet on experienced investors and entrepreneurs. In those situations, what happened in the past — even if it was in the very near past — often becomes a marginal factor, said Nicole Sanchez, chief executive of Vaya Consulting, a company in Berkeley, Calif., that advises tech companies on inclusivity.
“The way the big boys do business is that nothing is ever personal,” said Ms. Sanchez. “It’s, ‘Can you make me money?’ It doesn’t really matter who gets hurt.”
Mr. Cagney said in an interview on Friday that it had been a mistake to lie to SoFi’s board and to have the two relationships with employees. He said it had taken him many months to convince his investors that he had changed.
“There was a relatively long process of them understanding how I thought about it: ‘Did I really learn a lesson from SoFi? Was I really going to try to do things differently?’” he said.
But Mr. Cagney said he had never promised SoFi’s board that he would not enter into any new workplace relationships and he disputed that the board pushed him out last year. He said he had resigned on his own and could rejoin SoFi’s board anytime because he is one of the company’s biggest shareholders.
SoFi declined to comment.
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.
His new company, Figure, is set to issue a variety of loans and to record every detail about them on a blockchain, the new kind of database that was introduced by Bitcoin. According to a business plan given to investors and obtained by The Times, the Figure blockchain will have its own cryptocurrency that will be used to pay loan holders. The company also plans to do a so-called initial coin offering to sell its token to investors.
When Mr. Cagney began raising money for Figure last year, he approached current and former SoFi board members such as Mr. Chao of DCM and Mr. Anderson of Baseline.
Both are prominent Silicon Valley investors, having made regular appearances on the Midas List, the Forbes magazine ranking of the most successful and powerful venture capitalists. Mr. Anderson was one of the earliest investors in Instagram and Twitter, while Mr. Chao had led DCM’s bets on BitTorrent and Bill.com.
Both had also been on SoFi’s board during parts of Mr. Cagney’s tenure there and knew at least some of his history at the company, according to five people familiar with the investors and documents reviewed by The Times. DCM and Baseline invested the $17 million in Figure in January.
Another recent investor in Figure, RPM Ventures, had also funded SoFi. A current RPM partner, Adam Boyden, was the chief operating officer at SoFi when the problems with Mr. Cagney came up in 2012.
Mr. Boyden, who is now also a board observer at Figure, did not respond to a request for comment.
Not all investors who Mr. Cagney approached, and who knew of his history at SoFi, agreed to invest in Figure, said three people familiar with the discussions.
At the venture firm Ribbit Capital, some employees opposed investing in Figure because of Mr. Cagney’s past, three people briefed on the firm’s negotiations said. Ribbit eventually decided to invest in Figure. Ribbit did not respond to requests for comment.
Mr. Cagney has now raised a total of $58 million for Figure. He has set up offices in San Francisco’s financial district and hired more than 50 employees. He has told his investors that he sees an enormous opportunity ahead.
