The Synapse bankruptcy case had another court hearing on Wednesday (July 3), this one with consumers testifying to their financial losses and another status report filed by trustee Jelena McWilliams. In an “urgent” supplement to her fourth status report, the former FDIC chair put the spotlight on a time-sensitive dispute with financial services database provider […]
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The Synapse bankruptcy case had another court hearing on Wednesday (July 3), this one with consumers testifying to their financial losses and another status report filed by trustee Jelena McWilliams.
In an “urgent” supplement to her fourth status report, the former FDIC chair put the spotlight on a time-sensitive dispute with financial services database provider MongoDB. The trustee’s report, filed in the U.S. Bankruptcy Court for the Central District of California, underscores a potential threat to essential data and the potential ramifications for Synapse’s estate, creditors, and end users.
According to the status report, the data dispute has its beginning on June 18, when MongoDB notified Synapse of its intention to terminate services on all pending subscriptions effective June 30, citing unpaid services. This announcement triggered a series of actions by McWilliams and her advisers to back up crucial data from MongoDB’s servers. Despite concerted efforts, reads the report, it became evident by June 26 that not all data could be migrated in time.
Efforts to negotiate an extension with MongoDB initially led to an agreement to maintain access until July 7. However, MongoDB did not assure McWilliams that data would be retained beyond this date if the migration was not completed, raising concerns about potential data loss. In response, McWilliams issued a demand letter on July 1, requesting that MongoDB refrain from terminating access or deleting any data until the migration was completed. She argued that such actions would violate the automatic stay provisions of the bankruptcy code, as the data constitutes property of the debtor’s estate.
According to the report, it was a busy week right up until Wednesday’s hearing in the case. Despite McWilliams request, MongoDB’s formal response on July 2 rejected the trustee’s demands, asserting that her team had ample time to export the data and that the request for open-ended access was unreasonable. MongoDB reiterated that access would not extend beyond July 7 unless the outstanding payment of about $140,000 was resolved.
McWilliams and her advisers are evaluating potential courses of action to prevent the loss of vital data, including the possibility of filing an emergency motion to enforce the automatic stay. She emphasized the critical nature of these records for the reconciliation process with Synapse’s partner banks, which hold significant funds on behalf of end users.
Adding to the urgency of McWilliams report, she told the court she received a letter from the Federal Reserve on July 2 acknowledging the complexity of the situation and expressing concern for affected consumers. The Federal Reserve indicated that it is monitoring the situation and encouraged all parties to expedite the return of consumer funds. The agency highlighted the role of Federal Reserve Consumer Help (FRCH) in assisting consumers facing issues with accessing their funds.
McWilliams report states that the Fed’s involvement underscores the broader implications of the Synapse bankruptcy, given the interconnectedness of financial institutions and the necessity for precise data reconciliation. Her request to the Federal Reserve and other regulatory bodies sought support in protecting consumer interests and ensuring regulatory compliance during the resolution of the bankruptcy.
As the July 7 deadline approaches, McWilliams said she is working to secure and migrate the data critical to Synapse’s operations and the interests of its creditors and consumers. The potential filing of an emergency motion to enforce the automatic stay reflects the high stakes, she said, as well as her commitment to safeguarding Synapse’s remaining assets.
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