Federal Deposit Insurance Corporation (FDIC) Chairman Jelena McWilliams during a hearing of the Senate Committee on Banking, Housing and Urban Affairs in Washington, DC, United States, Tuesday, August 3, 2021.
Al Drago | Bloomberg | Getty Images
There’s an $85 million gap among fintech middlemen’s partner banks synapse What a depositor holds and owes, according to a court-appointed statement trustee In the Synapse bankruptcy case.
Trustee Jelena McWilliams said in a report that customers of fintech companies using Synapse to connect with banks have $265 million in balances, while the banks themselves have only $180 million tied to those accounts. Report Submitted Thursday evening.
The missing money explains the core reasons behind the worst collapse of the U.S. fintech industry since it emerged in the years following the 2008 financial crisis. Nearly a month after the collapse of Andreessen Horowitz-backed Synapse, more than 100,000 customers of various fintech companies had their savings accounts locked out start upthere were disagreements over user balances.
And Synapse and its partners, including Development Banks and Trustsaccused each other in court documents of improperly transferring balances or keeping incorrect ledgers, and McWilliams’ report is the first outside attempt to determine the scope of the missing funds in the chaos.
Many unknowns
Since being appointed trustee on May 24, McWilliams has been working with four banks – Evolve, American Bank, AMG National Trust and Lineage Bank – trying to reconcile their various books so customers can regain access to their funds.
But McWilliams said the bank needed more information to complete the project, including understanding how Synapse’s brokerage and lending operations might affect the flow of funds. Synapse apparently commingled funds from multiple institutions, using multiple banks to service the same company, she said.
To make matters worse, she said, it’s unclear where the missing funds went.
“It is unclear where the shortfall came from, including whether end-user funds and negative balance accounts were transferred between partner banks, thereby increasing or decreasing each partner bank’s respective shortfalls that may have previously existed,” McWilliams wrote. .
McWilliams, former FDIC Chairman and current partner at the law firm Kravasdid not respond to a request for comment.
spread pain
McWilliams said in the report that her task was made more difficult because there were no funds to pay for help from outside forensics firms or even former Synapse employees. Synapse laid off its last employee on May 24.
Still, she said, some customers whose funds were held in the bank’s so-called checking accounts have begun using the accounts.
But if users’ funds are pooled in a public account (called “FBO” or “For Benefit Of”), it will be difficult for them to get their money. She said a full settlement would still be weeks away.
In his report, McWilliams laid out several options for Judge Martin Barash to consider at Friday’s hearing that would allow at least some FBO clients to regain access to their funds.
These options include paying some customers in full while deferring payments to others, depending on whether individual FBO accounts have been reconciled. Another option is to spread the gap evenly among all clients to make limited funds available more quickly.
McWilliams said her recommendation would be to “distribute funds to end users as quickly as possible following Friday’s status meeting.”
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