Four Democratic U.S. Senators have a message for bankrupt FinTech Synapse: Let your customers get access to their deposits. The four senators — Senate Banking Committee chair Sherrod Brown of Ohio, Ron Wyden of Oregon, Tammy Baldwin of Wisconsin and Pennsylvania’s John Fetterman — wrote to the company’s owners and FinTech partners Monday (July 1), […]
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Four Democratic U.S. Senators have a message for bankrupt FinTech Synapse:
Let your customers get access to their deposits.
The four senators — Senate Banking Committee chair Sherrod Brown of Ohio, Ron Wyden of Oregon, Tammy Baldwin of Wisconsin and Pennsylvania’s John Fetterman — wrote to the company’s owners and FinTech partners Monday (July 1), calling on them to restore customers’ access to their funds.
Those funds have been frozen since mid-May, following Synapse’s bankruptcy filing in April, a development that continues to rock the FinTech world.
“As Synapse’s major equity holders, operators of Synapse-dependent financial services and products, and partner banks, it is ultimately your responsibility to ensure the safety and accessibility of end user funds,” the letter said.
The letter was sent to Synapse’s major investors and its bank and FinTech partners, including former Synapse CEO Sankaet Pathak, Andreessen Horowitz, Evolve Bank, Core Innovation Capital, Trinity Ventures, American Bank and AMG National Trust.
“Venture capital firms funded Synapse without insisting on adequate controls to protect consumers,” the senators wrote. “They stood to profit while Synapse billed itself as a trustworthy financial infrastructure provider. But they failed to make sure that Synapse could follow through on its commitments. Banks joined with Synapse in an effort to find new revenue streams. These partnerships further made it possible for Synapse to market services ultimately provided by the banks.”
As PYMNTS wrote in May, Synapse’s troubles began — or at least came to light — when the company’s biggest client, Mercury, decided to work directly with Evolve, Synapse’s core banking partner, thus eliminating the need for Synapse as an intermediary.
“That set off a chain of events, few of them good, for Synapse’s other clients who relied on the FinTech provider as their connective tissue,” that report said.
Synapse filed for bankruptcy and in April reached an agreement to be acquired by TabaPay, an arrangement that fell apart within weeks.
A recent status report on Synapse’s bankruptcy spotlights the difficulty in returning funds to the company’s customers.
Trustee Jelena McWilliams told the Central California Bankruptcy Court last month that partner banks have dispersed most funds held in demand deposit accounts (DDAs) to users.
But reconciling and returning funds held in more complex “for benefit of” (FBO) accounts has more of a challenge because of discrepancies in Synapse’s records and a potential shortfall of $65 million to $96 million.
“The impact of Synapse’s bankruptcy on end-users has been devastating,” McWilliams wrote in a letter to regulators included in the court filing. “I understand that, without these funds, many end-users are unable to pay for basic living expenses and food.”
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