Fintech
San Francisco Fintech Synapse Files for Bankruptcy
Synapse, a San Francisco-based fintech startup, has filed for bankruptcy. The sudden filing for Chapter 11 protection has frozen about $160 million in user funds, sending shockwaves through the fintech industry. Many businesses that relied on Synapse for their banking services are rushing to reevaluate their financial strategies, with uncertainty over whether they will ever recover their frozen funds.
Synapse has been a major player in the fintech space as a banking services provider, enabling companies to integrate banking services into their products. It has raised $50 million in venture capital, including a substantial investment in 2019 from Angela Strange of Andreessen Horowitz. With its wide range of services, Synapse has found applications in a variety of industries.
Plans to sell its assets to another fintech startup, TabaPay, for an estimated $9.7 million fell through, prompting Synapse to file for Chapter 7 liquidation.
Synapse Failure Rocks Financial Technology
This had a ripple effect on other fintech firms, such as Juno, Yotta, and Yieldstreet, which along with their customers have had to deal with the fallout from Synapse’s collapse.
Currently, about $160 million of the funds held in Synapse are inaccessible to customers, according to Fintech Business Weekly. The process of reconciling and distributing the remaining funds suggests that Synapse still owes about $158.6 million to customers, with a potential additional loss of between $65 million and $95 million.
Synapse CEO Sankaet Pathak, who is sparking controversy by launching a new robotics startup amid unresolved issues over $85 million in savings, is under intense scrutiny from a group of senators. They insist that affected customers must regain access to their funds and are pushing for swift action by the company, its banking associates and investors.
Synapse’s downfall highlights the vulnerabilities of the fast-moving, high-risk fintech startup scene. Mistakes in its financial management, such as its poorly conceived asset liquidation plan, have led to serious consequences. This collapse affects numerous fintech startups, most notably Juno and Yotta, bringing uncertainty to the fintech industry and serving as a stark reminder of the importance of risk mitigation strategies.