Congressional lawmakers demand partners of bankrupt Synapse make customers whole

The impact of the bankruptcy of Synapse Financial Technologies Inc. on customers spurred a bipartisan contingent of U.S. senators to call on the company’s numerous partners to promptly make all frozen deposits available to them.

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“To end the uncertainty and financial damage to consumers, we urge you to collectively pool the necessary resources to immediately make available all customer deposits currently frozen by the Synapse bankruptcy,” wrote the senators in a June 28 letter sent to 13 of the company’s principal bank and fintech partners.

U.S. Sen. Sherrod Brown (D-OH), chairman of the U.S. Senate Banking, Housing, and Urban Affairs Committee, as well as U.S. Sens. Ron Wyden (D-OR), Tammy Baldwin (D-WI), and John Fetterman (D-PA) signed the letter.

The lawmakers sent the letter to former Synapse CEO Sankaet Pathak; private American venture capital firm Andreessen Horowitz; Evolve Bank & Trust; Core Innovation Capital; Trinity Ventures; American Bank; AMG National Trust; Trust and Lineage Bank; fintech startup Copper; financial technology companies Juno and Mercury; alternative investment platform Yieldstreet; and banking platform Yotta.

The lawmakers pointed out that since mid-May, customers who entrusted their money to Synapse’s partners have been unable to access their money after Synapse — which connected customer-facing fintech apps to FDIC-backed banks — filed for bankruptcy in April amid disputes about customer balances.  

To date, these partners have failed to provide customers with a clear timeline for restoring access to their funds, according to the senators’ letter. 

“Equally disturbing is the potential shortfall of $65 [million] to $96 million between what consumers are owed and the funds held on their behalf by Synapse’s partner banks,” according to the letter. “These developments are both deeply troubling and completely unacceptable.”

The senators also noted that while they’ll find out in due time “who is ultimately responsible for this mess,” the current priority “must be to restore consumers’ access to all of their money.”

“Each of you is responsible for the customers who have been frozen out of their accounts,” the lawmakers wrote. “As those that made the current situation possible, you must accept the tremendous responsibility that comes with handling consumers’ money… [and] that means making customers whole — immediately.”