Yotta Says 85,000 Accounts Caught in Synapse Meltdown

The impact of Synapse’s bankruptcy continues to spiral outward, extending now to FinTech startup Yotta.

For the past three weeks, 85,000 of the company’s customers — holding a total of $112 million in savings — have been locked out of their accounts, CNBC reported Sunday (June 2).

The reason? Yotta is caught in the middle of a dispute between two of its banking partners: Synapse and Evolve Bank & Trust. Yotta founder and CEO Adam Moelis told CNBC the dispute has forced his customers to borrow money for food and put major events such as weddings and surgeries into flux.

“The stories are heartbreaking,” Moelis said. “We never imagined something like this could happen. We worked with banks that are members of the FDIC. We never imagined a scenario like this could play out and that no regulator would step in and help.”

The report said Yotta is the largest company so far impacted by Synapse’s bankruptcy.

As PYMNTS wrote last week, Synapse’s troubles began — or at least came to light — when the company’s largest client, Mercury, decided to work directly with Evolve, Synapse’s core banking partner, doing away with the need for Synapse as an intermediary.

“That set off a chain of events, few of them good, for Synapse’s other clients who relied on the FinTech provider as their connective tissue,” that report said.

Synapse filed for Chapter 11 bankruptcy and in April reached a deal to be acquired by TabaPay, an arrangement that evaporated within weeks. And while the company is now in Chapter 11, several media accounts have noted that Synapse may eventually convert to Chapter 7, which would bring about a liquidation of the firm. 

“The specter of liquidation, we note, raises the questions on what can be recovered, and how long it all will take … and what will happen to customers who relied on the interconnected relationships between Evolve and Synapse,” PYMNTS wrote.

For example, there’s Mainvest, which brought small businesses and investors together via its online platform. The company is shutting down its operations, and said in a statement on its website that “Due to the ongoing dispute between Evolve Bank and Synapse, all payment processing on Mainvest is currently unavailable including withdrawals and bank linkage.”  

Copper, another FinTech that used Synapse, has announced it will shutter at least some of its offerings, including bank deposit accounts and debit cards. 

“In terms of the expanded ecosystem, it’s estimated that Synapse’s roughly 100 FinTech partners have 10 million end customers,” PYMNTS wrote.