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Ledgers from failed fintech middleman Synapse show that almost all deposits from customers of banking app Yotta disappeared weeks ago, according to one of the lenders involved.
As of April 11, a network of eight banks held $109 million in deposits for Yotta customers. development bank & Trust said in bankruptcy court letter submit late Thursday.
About a month later, Evolve said, the books showed that one of the banks held only $1.4 million of Yotta’s funds. It added that neither the customer nor Evolve received funds during the period.
“These irregularities in Synapse’s Yotta end-user funds ledger are just one example of the many discrepancies observed by Evolve,” the bank said. “There must be a detailed investigation into what happened to these funds, or why the ledger provided by Synapse reflected Fund flows that did not actually occur.”
Evolve, one of the key figures in further development Dilemma The bank, which has had more than 100,000 fintech customers locked out of their bank accounts since May 11, has been trying with other banks to piece together records of who owes what. Its former partner, Synapse, which connects customer-facing fintech apps with FDIC-backed banks, filed for bankruptcy in April amid disputes over customer balances.
But evolution itself is rebuke The Fed came under criticism last week for failing to properly manage its fintech partnerships. The regulator noted that Evolve “engaged in unsafe and unsound banking practices” and forced the bank to tighten oversight of its fintech projects. The Federal Reserve stated that this enforcement action is not related to the Synapse bankruptcy case.
A spokesman for the Memphis, Tenn.-based bank said Evolve has been trying to separate itself from Synapse since late 2022 as it discovered issues with its books, but declined to comment further.
Jotta declined to comment.
Timeline unclear
While pressure is mounting on banks to unfreeze all locked accounts, confusing records and a lack of funds to pay for outside forensic analysis have created uncertainty about when that will happen.
Evolve insists it is hesitant to allow payments to many customers due to differences in the ledgers until a full reconciliation of the mismatched ledgers is completed, particularly those related to a group of banks used in the Synapse brokerage program Decide.
Evolve said in court documents that Synapse in late 2023 transferred the majority of fintech client funds held by Evolve to a group of banks related to its brokerage program.
Last week, court-appointed trustee Jelena McWilliams, the former FDIC chairperson, noted that “the last dollar This may not be possible using Synapse Ledger.
Even the total funding shortfall owed to all affected savers is unknown. Earlier this month, McWilliams put the amount at $85 million; subsequent reports put the amount at between $65 million and $96 million.
Pleading with regulators
Meanwhile, disruption to thousands of fintech customers continues into its sixth week. Many Yotta customers Contacted by CNBC, they use the service as their primary checking account, and the situation has turned their lives upside down.
in a letter McWilliams sent a plea to five U.S. regulators on Thursday asking for more involvement in the Synapse collapse and for resources to help affected customers understand where their funds are kept and help communicating with banks.
“The impact of Synapse’s bankruptcy on end users would be devastating,” McWilliams wrote in a letter to regulators. “Many end users are unable to afford basic living expenses and food. I appreciate your prompt attention to this request and implore your agency to act as quickly as possible.”
McWilliams is scheduled to provide an updated status report on his bankruptcy case at a hearing that begins at 1 p.m. ET on Friday.
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