Urgent Call from Democratic Senators: Major Investors and Banking Partners of Synapse Urged to Restore Access to Frozen Deposits Following Bankruptcy Filing

Mishawaka, Indiana, Indiana United States of America
Approximately 85,000 of the affected customers were with Yotta alone. One customer, Natasha Craft, had her entire savings of $7,006 frozen in a dispute playing out in bankruptcy court and online forums.
Democratic Senators urged major investors and banking partners of Synapse to restore consumer access to frozen deposits following the bankruptcy filing.
Four FDIC-backed banks had partnerships with Synapse: Evolve Bank & Trust, American Bank, AMG National Trust Company, and Lineage Bank.
Senators criticized these entities for not insisting on adequate controls to protect consumers while profiting from Synapse's services.
Synapse, a fintech firm offering 'banking as a service', filed for bankruptcy in April 2023, leaving over 100,000 customers without access to their funds.
Trustee Jelena McWilliams reported that partner banks have dispersed most funds held in demand deposit accounts to users but reconciling and returning funds held in more complex 'for benefit of' accounts is a challenge due to discrepancies in Synapse's records and a potential shortfall of $65 million to $96 million.
Urgent Call from Democratic Senators: Major Investors and Banking Partners of Synapse Urged to Restore Access to Frozen Deposits Following Bankruptcy Filing

A group of Democratic Senators is urging major investors, banks, and fintech partners of Synapse to collectively pool resources to restore consumer access to their frozen deposits following the fintech firm's bankruptcy filing in April 2023. The senators believe that these entities hold responsibility for ensuring the safety and accessibility of end-user funds.

Synapse, which offered 'banking as a service,' filed for bankruptcy, leaving over 100,000 customers without access to their funds. Four FDIC-backed banks had partnerships with Synapse: Evolve Bank & Trust, American Bank, AMG National Trust Company, and Lineage Bank.

The senators' letter was sent to major investors Andreessen Horowitz, Core Innovation Capital, and Trinity Ventures as well as the banking partners. They criticized these entities for not insisting on adequate controls to protect consumers while profiting from Synapse's services.

Synapse's troubles began when it could not reach an agreement with Evolve Bank on a settlement of funds after filing for bankruptcy. Regulators have been increasingly scrutinizing partnerships between fintech firms and FDIC-backed banks due to potential blind spots and risks.

The senators emphasized that the priority should be to restore consumers' access to their funds, as denying them access is a major no-no in the financial industry. They also noted that Synapse was marketed as a trustworthy financial infrastructure provider but failed to follow through on its commitments.

Approximately 85,000 of the affected customers were with Yotta alone. One customer, Natasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana, had her entire savings of $7,006 locked up in a dispute playing out in bankruptcy court and online forums.

The impact of Synapse's bankruptcy on end-users has been devastating. Trustee Jelena McWilliams reported 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 is a challenge due to discrepancies in Synapse's records and a potential shortfall of $65 million to $96 million.

The senators urged the entities named in the letter to collectively pool resources and restore consumer access to their frozen deposits. They also criticized venture capital firms for funding Synapse without insisting on adequate controls, allowing them to market services ultimately provided by banks.


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Confidence

91%

Doubts
  • It's unclear if all affected customers have been identified.
  • The exact amount of the potential shortfall in Synapse's records is uncertain.

Sources

95%

The overall score is a weighted number that takes into account conflict of interest, bias, deception and other practices that undermine the credibility of the source. It is calculated as:
(Site Conflicts Of Interest + Author Conflicts Of Interest) / 2.0 * 0.2 + ArticleBiasScore * 0.20 + UniquePointsScore * 0.05 + DeceptionScore * 0.20 + ReadabilityScore * 0.05 + FallacyScore * 0.20

A score that takes into consideration the content for flow, interruptions with ads, and overt search engine optimization techniques that makes the content hard to understand

How thousands of Americans got caught in fintech’s false promise and lost access to bank accounts

CNBC News Hugh Son Tuesday, 02 July 2024 14:30
  • Unique Points
    • Since May 11, over 100,000 Americans have been locked out of their fintech accounts.
    • Approximately 85,000 of these customers were with Yotta alone.
    • Natasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana, had her entire savings of $7,006 locked up in a dispute playing out in bankruptcy court and online forums.
  • Accuracy
    • The shortfall of missing funds was initially reported as $85 million but later revised to be between $65 million and $96 million.
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (85%)
    The article contains an example of a false promise fallacy. The author claims that fintech promised the best of both worlds: innovation and ease of use from apps combined with the safety of government-backed accounts held at real banks. However, this is a misleading statement as it suggests that these benefits were consistently provided by fintech startups, when in reality, many customers have faced issues and lost their savings due to the collapse of Synapse.
    • For customers, fintech promised the best of both worlds: The innovation, ease of use and fun of the newest apps combined with the safety of government-backed accounts held at real banks.
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication

82%

The overall score is a weighted number that takes into account conflict of interest, bias, deception and other practices that undermine the credibility of the source. It is calculated as:
(Site Conflicts Of Interest + Author Conflicts Of Interest) / 2.0 * 0.2 + ArticleBiasScore * 0.20 + UniquePointsScore * 0.05 + DeceptionScore * 0.20 + ReadabilityScore * 0.05 + FallacyScore * 0.20

A score that takes into consideration the content for flow, interruptions with ads, and overt search engine optimization techniques that makes the content hard to understand

A fintech collapse is rippling through a small corner of the banking world

Yahoo Finance David Hollerith Tuesday, 02 July 2024 22:03
  • Unique Points
    • Synapse, a fintech firm that offered 'banking as a service', filed for bankruptcy in April 2023.
    • Four FDIC-backed banks had partnerships with Synapse: Evolve Bank & Trust, American Bank, AMG National Trust, and Lineage Bank.
    • Problems arose when Synapse could not reach an agreement with Evolve on a settlement of funds after filing for bankruptcy.
    • Regulators have been increasingly scrutinizing partnerships between fintech firms and FDIC-backed banks due to potential blind spots and risks.
  • Accuracy
    • The shortfall of missing funds was initially reported as $85 million but later revised to be between $65 million and $96 million.
    • Synapse provided these banks with access to digital banking services and received deposits and fee revenue in return.
    • Customers’ funds have been inaccessible since mid-May due to Synapse’s bankruptcy filing in April.
  • Deception (35%)
    The article provides a detailed account of the collapse of fintech firm Synapse and its ripple effects on four small US banks and thousands of customers. However, it does not link to any peer-reviewed studies or preprints to support claims about the shortcomings in banking-as-a-service model. It also does not disclose sources for some of the statements made.
    • The saga surrounding the bankruptcy of Synapse, a 10-year-old fintech firm, puts a new spotlight on how loose webs of partnerships between venture-backed upstarts and FDIC-backed lenders can go so wrong.
  • Fallacies (85%)
    The article contains several instances of appeals to authority and inflammatory rhetoric. The author uses the words 'regulators are more closely scrutinizing' and 'warning various banks to tighten their controls' without providing any specific evidence or reasoning for why this is the case. This can be considered an appeal to authority fallacy as the author is relying on unnamed regulators as a source of truth without providing any context or evidence. Additionally, the author uses inflammatory language such as 'loose webs of partnerships' and 'goes so wrong' to describe the relationship between fintech firms and FDIC-backed lenders, which can be seen as an attempt to elicit an emotional response from the reader rather than providing objective analysis. The article also contains several instances of dichotomous depictions, such as describing Synapse as a 'major middleman' and a '10-year-old fintech firm' in the same sentence, which can be seen as an oversimplification of the situation.
    • ]The unraveling of fintech upstart Synapse is rippling through a small corner of the banking world[
    • Regulators are more closely scrutinizing these relationships and warning various banks to tighten their controls when working with fintech firms.
    • Acting Comptroller of the Currency Michael Hsu used a September 2023 speech to discuss the potential blind spots for regulators as these relationships become more blurry.
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication

99%

The overall score is a weighted number that takes into account conflict of interest, bias, deception and other practices that undermine the credibility of the source. It is calculated as:
(Site Conflicts Of Interest + Author Conflicts Of Interest) / 2.0 * 0.2 + ArticleBiasScore * 0.20 + UniquePointsScore * 0.05 + DeceptionScore * 0.20 + ReadabilityScore * 0.05 + FallacyScore * 0.20

A score that takes into consideration the content for flow, interruptions with ads, and overt search engine optimization techniques that makes the content hard to understand

Democratic lawmakers propose Synapse solution

Axios News Site: https://www.axios.com/2024/01-30/prior-authorization-gap-insurer-drug-decisions Lucinda Shen Tuesday, 02 July 2024 15:13
  • Unique Points
    • A group of Democratic Senators is calling on Synapse’s former CEO, investors, banks, and fintech partners to fill in the $65 million to $96 million shortfall that has left consumers without access to their funds.
    • Letter was sent to investors a16z, Core Innovation Capital, and Trinity Ventures,
  • Accuracy
    • The trustee has warned that user accounts may not be fully reconciled due to limited resources.
    • Approximately 85,000 of these customers were with Yotta alone.
    • Customers’ funds have been inaccessible since mid-May due to Synapse’s bankruptcy filing in April.
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (100%)
    None Found At Time Of Publication
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication

98%

The overall score is a weighted number that takes into account conflict of interest, bias, deception and other practices that undermine the credibility of the source. It is calculated as:
(Site Conflicts Of Interest + Author Conflicts Of Interest) / 2.0 * 0.2 + ArticleBiasScore * 0.20 + UniquePointsScore * 0.05 + DeceptionScore * 0.20 + ReadabilityScore * 0.05 + FallacyScore * 0.20

A score that takes into consideration the content for flow, interruptions with ads, and overt search engine optimization techniques that makes the content hard to understand

Dem Senators to Synapse: Let Customers Access Deposits

PYMNTS.com Unknown PYMNTS Tuesday, 02 July 2024 16:14
  • Unique Points
    • Four Democratic U.S. Senators have urged Synapse to allow customers access to their frozen deposits.
    • Customers’ funds have been inaccessible since mid-May due to Synapse’s bankruptcy filing in April.
    • Synapse is ultimately responsible for ensuring the safety and accessibility of end user funds according to the senators.
    • The letter was sent to Synapse’s major investors, including Andreessen Horowitz, and its bank and FinTech partners.
  • Accuracy
    • The trustee overseeing Synapse’s bankruptcy reported that most funds held in demand deposit accounts have been returned to users but returning funds from more complex ‘for benefit of’ accounts is challenging due to discrepancies and a potential shortfall of $65 million to $96 million.
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (100%)
    None Found At Time Of Publication
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication