Fintech
Infighting among fintech operators led TabaPay to ‘back out’ of buying bankrupt Synapse
TabaPay has abandoned its plans to purchase the assets of the troubled banking-as-a-service startup Synapse, TabaPay confirmed to TechCrunch today. Synapse says the problem is banking partner Evolve Bank & Trust. And Evolve claims it was not involved and bears no blame. Meanwhile, another player in the saga, Mercury, says the Synapse accusations have “no merit.”
Synapse’s lawyer said Thursday in bankruptcy court that the deal would not move forward, Fintech Business Weekly’s Jason Mikula shared on LinkedIn. A spokesperson for TabaPay confirmed to TechCrunch on Thursday afternoon that the company had “retired,” but provided no further details.
Synapses CEO and co-founder Sankaet Pathak, however, believes TabaPay can still be persuaded to stay in the deal. He told TechCrunch that his “understanding is this TabaPay is still interested in making the acquisition, but Evolve has failed to meet the closing conditions for TabaPay to close.”
The final condition is that Evolve Bank & Trust must fully fund its FBO accounts and has so far failed to do so, according to Pathak. FBO stands for “for benefit account” and is defined as “a bank or investment account set up to receive funds on behalf of a third party or beneficiary.”
For its part, an Evolve spokesperson told TechCrunch that “Evolve was not part of the Tabapay (sic) acquisition and we had no closing conditions to meet. However, we did have a settlement agreement with Synapse that included a financing condition. This condition evolves when this condition is met.”
However, Pathak claims: “Up until last night, Evolve had communicated that it would fund its FBO accounts as required by the parties’ settlement agreement, but continued to request extensions to resolve the matter with Mercury and to obtain buy-in from Mercury,” Pathak told TechCrunch. “And last night, Evolve informed Synapse and TabaPay that they had fully funded the accounts, when they had not. Given the open issue, TabaPay is unable to close the transaction.”
Synapse ran into trouble last year after acting as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to end their respective relationships with Synapse and work directly with each other, Evolve and Synapse were reportedly at odds with each other as the relationship was ending. (Evolve should not be confused with another Mercury partner, Choice Bank, which the FDIC is reviewing for compliance allowed the opening of Mercury accounts abroad.)
In an average postPathak alleges that when Mercury and Evolve ended their partnership with Synapse, Mercury moved $49.6 million more from Synapse-affiliated accounts than Synapse believes it should have and failed to reconcile the overdraft.
In October, Mercury publicly stated that the transition from Synapse was complete and “reconciled.”
“Our hope with open sourcing this information is that there will be a public outcry (at least from our customers) that will motivate Evolve and/or Mercury to quickly resolve this issue instead of hoping this issue will go away,” he wrote Pathak. “This resolution is important to Synapse and our ability to close the TabaPay transaction. Our understanding is that Taba would complete the acquisition if Evolve meets the final financing conditions of its accounts.”
In a written statement, a Mercury spokesperson told TechCrunch: “We have thoroughly investigated the Synapse claims since they were brought to our attention in March 2024 – six months after our migration from Synapse – and are confident that have no merit and all client funds are accounted for.”
On April 22, TechCrunch reported that Synapse had filed for Chapter 11 bankruptcy and that its the assets would be acquired by TabaPayaccording to the two companies.
The deal was awaiting bankruptcy court approval.
The $9.7 million purchase price was significantly less than the more than $50 million in venture capital that Synapse had raised over time from investors such as Andreessen Horowitz, Trinity Ventures and Core Innovation Capital.
Founded in 2017, headquartered in Mountain View TabaPay is an instant money movement platform that SoftBank backed in a 2022 round with an undisclosed sum. It’s unclear how much venture capital it has raised.
San Francisco-based Synapse, which operated a platform that allowed banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and Pathak.
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