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The ledger of the failed fintech intermediary Synapse shows almost all the deposits available to our customers Yotta banking application went missing several weeks ago, according to one of the lenders involved.
A network of eight banks held $109 million in deposits for Yotta customers as of April 11. Development banks & Trust said in a letter to the bankruptcy court submit late Thursday.
About a month later, the ledger showed only $1.4 million in Yotta funds held at one of the banks, Evolve said. It added that neither customers nor Evolve received funds during that period.
“Anomalies in the treasury ledger of Synapse end user Yotta are just one example of many discrepancies observed by Evolve,” the bank said. “A detailed investigation into what happened to these funds, or alternatively, why the ledger provided by Synapse reflects money movements that did not actually occur, must be undertaken.”
Development, one of the key factors in deepening difficult situation That has left more than 100,000 fintech customers locked out of their bank accounts since May 11, trying to join other banks in piecing together a record of who owes what. Former partner Synapse, which connects consumer-facing fintech applications with FDIC-backed banks, filed for bankruptcy in April amid a dispute over customer balances.
But Evolve itself criticize by the Federal Reserve last week for failing to properly manage its fintech partnerships. The regulator noted that Evolve “engaged in unsafe and unsound banking practices” and forced the bank to improve oversight of its fintech program. The Fed said this enforcement action is separate from the Synapse bankruptcy case.
A spokesperson for the Memphis, Tennessee-based bank said Evolve has been trying to distance itself from Synapse since late 2022 because of ledger issues it discovered and declined to comment further.
Yotta declined to comment.
The timeline is unclear
Despite growing pressure on the banks involved to release all locked accounts, disorganized records and a lack of funds to pay for an external forensic analysis have created uncertainty. sure about when that will happen.
Evolve asserted that due to discrepancies in the ledgers, it was hesitant to allow payments to multiple customers until reconciliation of mismatched ledgers had been completed, particularly in relation to a group of banks used in the Synapse broker program.
Synapse transferred the majority of fintech customers’ funds held at Evolve to a group of banks affiliated with its brokerage program in late 2023, Evolve said in court filings.
Last week, the court-appointed trustee, former FDIC Chairwoman Jelena McWilliams, noted “a complete settlement between the parties.” last dollar with Synapse Ledger” may not be possible.
Even the total shortfall of all affected depositors is not known. Earlier this month, McWilliams pegged the amount at $85 million; but subsequent reports stated that it was between $65 million and $96 million.
Pray to the management agency
Meanwhile, disruption to thousands of fintech customers has stretched into a sixth week. Many Yotta customers contacted of CNBC said they used the service as their primary checking account and their lives have been turned upside down by the situation.
in one letters sent Thursday, McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse, asking for resources to help affected customers understand where their funds are held. Where and support contact with banks.
“The impact of Synapse’s bankruptcy on end users is devastating,” McWilliams wrote to regulators. “Many end users cannot afford basic living and food expenses. I appreciate your prompt attention to this request and respectfully request your agencies to act as quickly as possible.” maybe.”
McWilliams is expected to present its latest status report in the bankruptcy case during a hearing that begins at 1 p.m. ET Friday.
