Stating the obvious, this is bad. These people did not “gamble” on some meme stock or coin, these were literal savings accounts, supposedly backed by insurance. There should be no way to lose the...
The crisis started in May when a dispute between Synapse and Evolve Bank over customer balances boiled over and the fintech middleman turned off access to a key system used to process transactions.
Synapse helped fintech startups like Yotta and Juno, which are not banks, offer checking accounts and debit cards by hooking them up with small lenders like Evolve.
In the immediate aftermath of Synapse’s bankruptcy, which happened after an exodus of its fintech clients, a court-appointed trustee found that up to $96 million of customer funds was missing.
The mystery of where those funds are hasn’t been solved, despite six months of court-mediated efforts between the four banks involved. That’s mostly because the estate of Andreessen Horowitz-backed Synapse doesn’t have the money to hire an outside firm to perform a full reconciliation of its ledgers, according to Jelena McWilliams, the bankruptcy trustee.
A Synapse contract that customers received after signing up for checking accounts stated that user money was insured by the FDIC for up to $250,000, according to a version seen by CNBC.
“According to the FDIC, no depositor has ever lost a penny of FDIC-insured funds,” the 26 page contract states.
In June, the FDIC made it clear that its insurance fund doesn’t cover the failure of nonbanks like Synapse, and that in the event of such a firm’s failure, recovering funds through the courts wasn’t guaranteed.
Evolve says that “the vast majority” of funds held for Yotta and other customers were moved to other banks in October and November of 2023 on directions from Synapse, according to an Evolve spokesman.
“Where those end user funds went after that is an important question, but unfortunately not one Evolve can answer with the data it currently has,” the spokesman said.
Stating the obvious, this is bad. These people did not “gamble” on some meme stock or coin, these were literal savings accounts, supposedly backed by insurance.
There should be no way to lose the proceeds from your home sale from what basically amounts to depositing them. I’m sure this will entail a legal mess for years to come. I truly hope those affected will see compensation… but given this article, I’m not really too positive.
Stating the obvious, this is bad. These people did not “gamble” on some meme stock or coin, these were literal savings accounts, supposedly backed by insurance.
There should be no way to lose the proceeds from your home sale from what basically amounts to depositing them. I’m sure this will entail a legal mess for years to come. I truly hope those affected will see compensation… but given this article, I’m not really too positive.