A group of senators has come together to push Synapse Fintech’s owners and partners to take action and restore customer access to their funds. The senators, including U.S. Senator Sherrod Brown and others, highlighted that customers have been unable to access their money since mid-May due to issues with Synapse and its partners.
The letter sent by the senators was directed at W. Scott Stafford, president and CEO of Evolve Bank & Trust, as well as major investors in Synapse and other bank and fintech partners. The senators emphasized the responsibility of all parties involved, including venture capital firms, in ensuring the safety and accessibility of customer funds.
Synapse, a banking-as-a-service startup based in San Francisco, provided services that allowed fintech companies to integrate banking services into their platforms. The company faced financial difficulties, leading to layoffs and eventually filing for Chapter 11 bankruptcy in April. Subsequently, Synapse was pressured to file for Chapter 7 bankruptcy, leaving customers unable to access their funds.
The senators expressed concern over the potential shortfall of funds held on behalf of customers by Synapse’s partner banks, calling the situation troubling and unacceptable. They urged all parties to work together to restore access to customer deposits frozen by the bankruptcy.
In addition to addressing the specific case of Synapse, the senators criticized the banking-as-a-service model as a whole, highlighting weaknesses in the tri-party business structure. They pointed out other recent incidents in the fintech industry, such as a cyberattack and data breach affecting Evolve Bank and its partner companies, as well as enforcement actions taken against other BaaS startups.
The senators emphasized the need to prioritize restoring customer access to funds and holding all parties accountable for their roles in the situation. They called on venture capital firms, banks, and fintech companies to ensure that consumer funds are protected and accessible.
The recent events in the fintech industry have raised concerns about the security and reliability of banking services provided by third-party companies. Customers and businesses affected by the Synapse bankruptcy and other incidents are facing challenges in accessing their funds and personal information. The senators’ letter serves as a reminder of the importance of safeguarding consumer assets and holding financial institutions accountable for their responsibilities.
