The collapse and bankruptcy of fintech company Synapse, specializing in Banking-as-a-Service (BaaS), has shed light on the interconnected nature of the fintech industry and the impact of key players facing challenges.
Synapse provided a platform for other fintech firms to integrate banking services into their products. For instance, it enabled a payroll software provider to offer instant payment services and facilitated the issuance of specialized credit/debit cards by various companies.
Despite raising over $50 million in venture capital, including a significant Series B round in 2019 led by Andreessen Horowitz, Synapse faced difficulties in 2023, leading to layoffs and ultimately filing for Chapter 11 bankruptcy in April. However, the planned asset sale to TabaPay fell through, resulting in Synapse liquidating under Chapter 7.
The fallout from Synapse’s demise has had ripple effects on other fintechs like Juno, Yotta, and Yieldstreet, impacting their customers as well.
The aftermath has sparked discussions about the viability of the Banking-as-a-Service concept and digital banking as numerous consumers, with deposits totaling nearly $160 million, are unable to access their funds.
2024
Nearly $160 million in funds still frozen
July 7: An update revealed that approximately $158.6 million remained frozen, with efforts to release the funds slowing down. A significant amount of funds, estimated between $65 million to $95 million, were still missing, further complicating the situation for end users.
Senators urge Synapse and its partners to restore customers’ access to funds
July 1: A group of senators called on Synapse’s owners, bank partners, and investors to prioritize restoring customer access to their money, signaling a collective responsibility among stakeholders to address the issue.
Synapse CEO ventures into a new startup
June 12: While questions loomed over missing customer savings, Synapse’s CEO embarked on a new venture, securing funding for a robotics startup despite the ongoing financial turmoil surrounding Synapse.
Fallout continues, impacting more fintechs and consumers
May 25: Reports indicated that the collapse of Synapse affected numerous fintech companies and millions of consumers, with platforms like Juno, Yotta, and Mainvest feeling the repercussions of Synapse’s bankruptcy.
U.S. Trustee advocates for Chapter 7
May 16: Following a series of mismanagement allegations, a trustee pushed for Synapse’s bankruptcy status to convert from Chapter 11 to Chapter 7 liquidation, citing minimal chances of successful reorganization.
Copper discontinues banking operations
May 13: Impacted by Synapse’s troubles, teen banking startup Copper had to halt its banking services, leaving depositors, predominantly families, stranded without access to their deposited funds.
Sale of assets abandoned
May 9: TabaPay withdrew from the deal to purchase Synapse’s assets, leading to disputes among involved parties, including accusations from Synapse’s CEO and denials from banking partners.
Synapse files for bankruptcy, asset sale terminated
April 22: Synapse initiated Chapter 11 bankruptcy proceedings with plans to sell assets to TabaPay, a deal that subsequently fell through, resulting in Synapse’s liquidation under Chapter 7.
2023
Synapse lays off staff, tensions with partner Evolve Bank surface
October 13: Strains in relationships with partners like Evolve Bank & Trust became apparent as Synapse underwent staff layoffs and restructuring, impacting its operational capability.
October 6: Following earlier layoffs attributed to economic conditions affecting clients and growth prospects, Synapse confirmed a significant workforce reduction, further highlighting the challenges faced by the company in a changing market landscape.
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