Fintech
Fintech Data Controversy Threatens Customers’ Money
A California bankruptcy judge warns a database company against deleting data despite the costs.
A California bankruptcy judge warns a database company against deleting data despite the costs.
Efforts to return millions of dollars to customers locked out of their accounts continue to be hampered by a dispute between fintech intermediary Synapse Financial Technologieswho has filed an application for Chapter 11 Bankruptcyand its database provider, MongoDB, to which Synapse owes money. The disagreement emerged during a bankruptcy hearing Wednesday, where former Federal Deposit Insurance Chair Jelena McWilliams, appointed to oversee Synapse’s liquidation, warned the court that MongoDB could soon delete crucial customer data.
The data, estimated at about 4 terabytes, is essential to accurately distribute more than $100 million to affected customers and to investigate a potential shortfall of between $65 million and $96 million, McWilliams said.
DIFFICULTY
The data dispute adds another layer of stress for customers of Yotta, Juno and other fintech apps who have been unable to access their funds since May. During the hearing, several Yotta and Juno users shared the difficulties they’ve faced because of the lack of access. One user, recently laid off from her tech job, was terrified of losing her home because of mounting bills, while another described a potential delay in her education because she relies on the $7,000 in her account to pay her college tuition.
PRESERVATION OF CRUCIAL DATA
McWilliams stressed the urgency of preserving the data stored in MongoDB’s system, telling the court that the sheer volume of data makes it impossible to quickly migrate it elsewhere while ensuring its safety for future use and investigation. However, MongoDB, in a July 2 letter made public at the hearing, rejected McWilliams’s claim that Synapse deserves “open” access to the data and told the court that it is owed at least $140,000 and will only grant access until July 7.
JUDGE WARNS OF CONSEQUENCES
Judge Martin Barash, presiding judge of the Central Bankruptcy Court in California, sternly warned MongoDB of the potential repercussions if it deleted Synapse’s data, reiterating that the information stored in its system belongs to Synapse and is protected by the bankruptcy court, warning that “it’s better to preserve the data,” adding, “you’re playing with fire.”
Despite his blunt warnings, the judge acknowledged the unique challenges of this bankruptcy case, where the money is sitting with banks, not Synapse itself, which is acting purely as an intermediary. He urged McWilliams and other advisers to expedite the resolution, but acknowledged the limited comfort that provides to fintech app users who need their money “to pay for their lives.”
Judge Barash asked counsel for both MongoDB and Synapse to find a quick resolution to the dispute. McWilliams acknowledged the fairness of MongoDB’s request for payment, while also acknowledging the difficulties faced by the app’s users struggling to pay their bills. He vowed to “do whatever is necessary to preserve the data” as quickly as possible.