Fintech
Democrat Senators at Synapse: Allow Customers to Access Deposits
Four Democratic U.S. Senators Have a Message for Bankrupt FinTech Synapses:
Allow your customers to access their deposits.
The Four Senators — Chairman of the Senate Banking Committee Sherrod Brown of Ohio, Ron Wyden of Oregon, Tammy Baldwin of Wisconsin and Pennsylvania John Fetterman — wrote to the company’s owners and FinTech partners on Monday (July 1), inviting 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 Conquer the FinTech World.
“As major shareholders of Synapse, operators of financial services and products dependent on Synapse, and partner banks, it is ultimately your responsibility to ensure the safety and accessibility of end-user funds,” the letter reads.
The letter was sent to Synapse’s major investors and its banking and FinTech partners, including Synapse’s former CEO Sankaet Pathak, Andreessen Horowitz, Evolving the bank, Core innovation capital, Trinity Ventures, American Bank AND AMG National Trust.
“The venture capital firms funded Synapse without insisting on adequate oversight to protect consumers,” the senators wrote. “They profited while Synapse presented itself as a trusted financial infrastructure provider. But they failed to ensure that Synapse could meet its commitments. Banks joined Synapse in an effort to find new revenue streams. These partnerships further enabled Synapse to commercialize services ultimately provided by banks.”
As PYMNTS wrote in May, Synapse’s problems began, or at least came to light, when the company’s largest customer, Mercurydecided to partner directly with Evolve, Synapse’s primary banking partner, thus eliminating the need for Synapse as an intermediary.
“This set off a chain of events, few of them are goodfor other Synapse customers who have relied on the FinTech provider as their connective tissue,” the report reads.
Synapse filed for bankruptcy and reached a deal in April to be acquired by TabaPay, a deal that fell through within weeks.
A recent report on the state of bankruptcy of Synapse highlights the difficulty in returning funds to the company’s customers.
Bankruptcy Trustee Jelena McWilliams told the Central California Bankruptcy Court last month that partner banks had distributed most of the funds held in demand deposit accounts (DDAs) to users.
But reconciling and returning funds held in more complex “for the benefit of” (FBO) accounts presents greater challenges due to discrepancies in Synapse’s records and a potential shortfall of between $65 million and $96 million.
“The Impact of Synapse Failure on End Users it was 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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