• Thu. Jul 25th, 2024

Deposits of Fintech Yotta’s Clients Vanished in Synapse Collapse

John Wise

ByJohn Wise

Jun 21, 2024

According to a lender involved, almost all customer deposits of banking app Yotta disappeared weeks ago. This is evident from a look at the ledgers of failed fintech Synapse.

Late on Thursday, a bankruptcy court letter was filed by Evolve Bank & Trust. The letter revealed that as of April 11th, a total of $109 deposits on behalf of Yotta customers had been held in eight banks.

The Discrepancy

Evolve disclosed that only $1.4 million in customer funds were shown in the ledger a month later, which were held in a single bank.

It added that no funds had been given to Evolve, or any customers, during this time. The bank asserted that this discrepancy in Synapse’s ledger related Yotta customer deposits was not the only one.

It implied that there were other irregularities as well and said that an investigation into the matter was essential.

Evolve said that they needed to figure out where the funds had gone, or why the money movement reflected in the Synapse ledger did not take place.

The Background

Since May 11th, over 100,000 fintech customers have not been able to access their bank accounts. Evolve is also a prominent player in the messy scenario.

It has been working with other banks to figure out who is owed what. Synapse had been its partner before filing for bankruptcy in April due to discrepancies in customer balances.

Last week, the Federal Reserve reprimanded Evolve for not managing its fintech partnerships properly. According to the regulator, its banking practices were unsound and unsafe.

This had prompted Evolve to review its fintech program. The Fed stated that the Synapse collapse was a different matter and not related to the enforcement action.

A spokesman for Evolve said that since late 2022, the Memphis, Tennessee-based bank had been trying to extricate itself from Synapse.

The Problems

Co-founder and CEO of Yotta, Adam Moelis, said that Synapse said that its customer deposits were held by Evolve.

There is a disagreement between Synapse and Evolve over who has the funds, thereby responsible for freezing accounts.

Moelis said that the trial balance report that Synapse had provided on May 17th showed that Evolve held customer funds worth $112 million.

While pressure has been mounting on banks to unfreeze the accounts, there is uncertainty about what will happen.

This is due to the lack of funds and the messy records. According to Evolve, it is hesitating to pay customers until all discrepancies are resolved.

It is particularly true for the banks that were part of the Synapse brokerage program. Evolve revealed that Synapse had moved most of the fintech customer funds to these banks in late 2023.

Jelena McWilliams, the court-appointed trustee, said last week that a full reconciliation with the Synapse ledger may not be possible.

John Wise

John Wise

John Wise is a seasoned fintech analyst and writer with over a decade of experience in the field. With a Master’s degree in Computer Science from MIT, he specializes in simplifying complex financial technologies for a broad audience. At FinTech Service Reviews, John provides insightful and thorough reviews, helping readers navigate the evolving landscape of financial technology with ease.

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