Fintech
Senators Push Synapse Partners to Return Customer Funds
Quick dive:
- A group of senators has called on partners and investors in fintech middleware Synapse to return millions of dollars to customers whose money is no longer accessible due to the struggling company’s bankruptcy proceedings.
- In a Letter of June 28Senate Banking Chairman Sherrod Brown, D-OH, along with Democratic Senators John Fetterman of Pennsylvania, Ron Wyden of Oregon and Tammy Baldwin of Wisconsin, urged those with ties to Synapse “to marshal the resources necessary to immediately make available all customer deposits currently frozen by Synapse’s bankruptcy.”
- The fintech failure “exposed the inherent weaknesses of this tripartite business model,” the senators wrote, adding that they expect the firms involved to “take all necessary measures” to ensure customer integrity.
Further information:
The letter, addressed to Evolve Bank & Trust CEO Scott Stafford, It was also sent to former Synapse CEO Sankaet Pathak, venture capital firm Andreessen Horowitz and other major investors in the failed company, other banking partners including American Bank and AMG National Trust, and consumer-facing fintech partners such as Copper, Yotta, Juno and Mercury.
In the letter, the senators highlighted the roles each of them played in the lead-up to the Synapse disaster: from the venture capital firms that funded the San Francisco-based fintech middleware without insisting on sufficient oversight to protect consumers, to the consumer-facing fintechs that promised their products were as safe as those from banks.
“As those who made this situation possible, you must accept the enormous responsibility that comes with managing consumers’ money,” the lawmakers scolded.
For more than a month, about 100,000 customers have been locked out of accounts at banks that work with Synapse. Affected customers have not even received a clear timeline for when access to their funds will be restored, the senators wrote.
Lawmakers have called the potential $65 million to $96 million shortfall, between what is owed to consumers and funds held on their behalf by Synapse’s partner banks, “troubling.” The sizable shortfall is likely to add complications and time to the process of returning funds to customers. Evolve, one of the partner banks involved in Synapse’s bankruptcy case, and Synapse disagree over which firm holds customer funds.
“These developments are both deeply troubling and completely unacceptable,” the senators wrote. “In due time, we will find out who is ultimately responsible for this mess, but in the meantime, the priority must be to restore consumers’ access to all their money.”
Jelena McWilliams, former chair of the Federal Deposit Insurance Corp. and Synapse’s bankruptcy trustee, has called on leaders of the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency and the Securities and Exchange Commission to direct their agencies’ consumer protection units to help consumers.
Evolve has been hit by a Federal Reserve Enforcement Action last month, for deficiencies in the bank’s anti-money laundering, risk management and consumer compliance programs. Last week, the bank also confirmed that suffered a data breach which involved the publication of customers’ personal information on the dark web.