Synapse Financial Technologies

Last updated
Synapse Financial Technologies
Company type Private company
Industry Financial services
FoundedApril 14, 2014 (2014-04-14)
Founder Sankaet Pathak [1]
DefunctApril 2024;1 year ago (2024-04)
FateBankrupt
Headquarters,
Area served
United States
Key people
Sankaet Pathak (CEO) [1]
Products banking as a service to other financial technology companies
Number of employees
157 (2024)
Website synapsefi.com Archived May 9, 2024, at the Wayback Machine

Synapse Financial Technologies, Inc. was an American banking as a service company based in San Francisco. It was founded in 2014 and filed for bankruptcy in April 2024. [2] [3]

Contents

History

Synapse was founded in 2014 as a banking as a service platform. [4] The company claimed to keep customer deposits in FDIC insured bank accounts, and argued that this provided a comparable level of depositor protection to conventional bank accounts. However, since Synapse was a non-bank company, it did not provide FDIC protection for depositors against its own bankruptcy. [5]

The company was backed by Andreessen Horowitz and raised $51 million from investors. [6] The company had 100 direct business relationships with financial technology companies including Dave and Honey, [1] indirectly serving 10 million retail customers through those relationships. [7] [8] It was one of the 100 fastest growing financial services companies in the United States in 2022. [9] The company was valued as a unicorn in 2024. [10]

The company filed for chapter 11 bankruptcy protection in April 2024. [11] Following the bankruptcy declaration, "tens of thousands of U.S. businesses and consumers" lost access to Synapse's services, leaving questions as to the location of funds. [3] [7] [12] In May 2024, former FDIC Chair Jelena McWilliams, appointed as bankruptcy trustee, said there was a shortfall between Synapse’s records and those of the banks, estimated at $65 million to $96 million. [5] [6]

The CEO of Yotta Savings – a fintech company which relied on Synapse to manage customer deposits – released financial data in November 2024 showing that 13,725 former customers lost deposited money due to the Synapse bankruptcy. They were refunded $11.8 million, a fraction of their $64.9 million deposits. [13]

As of November 2024, a lawsuit was in progress against four of Synapse's banking partners, seeking class action status in regard to losses by those affected by Synapse's actions. [14]

References

  1. 1 2 3 Kauflin, Jeff (April 1, 2020). "Broken Synapse: Why Employees And Customers Are Fleeing This Andreessen-Backed Fintech Startup". Forbes. Retrieved 2024-11-23.
  2. Azevedo, Mary Ann (May 25, 2024). "Synapse, backed by a16z, has collapsed, and 10M consumers could be hurt". TechCrunch . Retrieved 2024-11-23.
  3. 1 2 Sweet, Ken (May 22, 2024). "Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans' deposits". AP News . Retrieved 2024-11-23.
  4. "What Synapse's bankruptcy means for the BaaS model". American Banker. 2024-04-23. Retrieved 2025-04-06.
  5. 1 2 Mason, Emily (17 June 2024). "Is Your Money Really Safe In An 'FDIC-Insured' Fintech Account?". Forbes.
  6. 1 2 Mason, Emily (24 May 2024). "Synapse Management Ousted As Fintech Customers Remain Frozen Out Of Their Accounts". Forbes.
  7. 1 2 Sweet, Ken (23 May 2024). "Abrupt bankruptcy of financial middleman Synapse freezes bank accounts of tens of thousands of U.S. businesses and consumers". Fortune.
  8. Weinberger, Evan (June 12, 2024). "Andreessen-Backed Fintech's Meltdown Shows Bank Middlemen Risks". Bloomberg Law .
  9. "Meet the Inc. 5000 Companies: Winning in a Time of Change and Achieving Spectacular Growth". Inc.com. Archived from the original on 2025-02-19. Retrieved 2025-05-20.
  10. Garfinkle, Leo Schwartz,Allie. "The spectacular Synapse collapse: Inside the ugliest divorce in fintech, which left $200 million in customer money frozen". Fortune. Retrieved 2025-04-24.{{cite web}}: CS1 maint: multiple names: authors list (link)
  11. Sweet, Ken (May 22, 2024). "Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans' deposits". AP News . Retrieved 2024-11-23.
  12. Chakravarty, Rajashree (October 30, 2024). "5 lessons learned from Synapse's collapse". Banking Dive. Retrieved November 23, 2024.
  13. Son, Hugh (November 22, 2024). "'I have no money': Thousands of Americans see their savings vanish in Synapse fintech crisis". CNBC . Retrieved 2024-12-11.
  14. Chakravarty, Rajashree (November 27, 2024). "Synapse partner banks hit with lawsuit over fund mismanagement". Banking Dive. Retrieved 2024-12-16.