The latest bankruptcy hearing for Synapse Financial Technologies on February 7 provided little solace to the thousands upon thousands of people still locked out of their savings, including this article’s author. While the court acknowledged the ongoing reconciliation efforts, the reality remains bleak – millions of dollars are still missing, and for many, the financial and emotional toll is mounting.
Synapse’s financial collapse has exposed the vulnerabilities of a system that promised the protection of the Federal Deposit Insurance Corporation (FDIC) while managing funds through a complex network of fintech companies, partner banks and an intermediary between them – Synapse. And for many, the promise of secure, high-yield savings accounts through fintech apps like Yotta and Juno, which partner with Evolve Bank & Trust to store customer funds, proved to be a gateway to financial loss rather than gain.
The $65-95 million estimated shortfall has impacted the lives of thousands of people across the nation, and their stories are not just about lost money – they’re about splintered trust, upended plans and the struggle to rebuild.
The account balances and reconciliation amounts shared throughout this story were obtained during interviews with the respective impacted end-users.
The lure of FDIC coverage
For many users, the decision to use a fintech company to store their savings was rooted in the assurance that their money would be in an FDIC insured, high-yield savings account. Ana Petcu from California was one of those users. Petcu had over $11,000 in her Yotta savings account but was told by Evolve, a Yotta partner bank, that the bank owes her only about $1.50.
“We gave [Yotta] money. [Yotta] told us it’s FDIC insured … The money we put in should be returned to us,” Petcu said, referring to Yotta’s responsibility to its customers. “I understand I maybe gambled my interest,” she added, but not her savings.
Bradley Lott-Tillery, 24, from Arizona also entrusted Yotta with his savings, thinking his money would be protected by the federal government. “I emailed [Yotta], made sure it was FDIC insured. Of course, they emailed me back and told me, yes, it’s FDIC insured, which we now know is not true,” Lott-Tillery said.
While the banks with which fintech companies like Yotta and Juno partner are FDIC insured, this only kicks in when a bank is found to have failed. Since the intermediary Synapse filed for bankruptcy, but not any of the banks, the money is not covered by the regulatory agency.
Lott-Tillery said Evolve Bank told him it only has $0.69 of the approximately $30,100 he deposited with Yotta. The rest is somewhere in the “Synapse ecosystem,” an elusive place where thousands of Americans’ savings supposedly reside.
The ripple effect: Health, relationships and debt
The financial strain has extended beyond bank balances, affecting the mental and physical health of those who’ve been blocked from their savings for about ten months now.
For Jared Fread, 40, the fallout of Syanpse’s bankruptcy has been devastating. Struggling with debilitating health issues in Hawaii, Fread decided to move to California to seek further medical care. But before he could secure treatment, he lost access to his Juno savings, indefinitely halting his access to the healthcare he needs.
“It’s been pretty bad to be honest. Like, I live out of my vehicle in California trying to get back on my feet,” Fread said. “I’m living on credit cards now at this point, unfortunately.”
Additionally, Fread had to borrow money from his mother when his van’s entire engine needed to be replaced. As his home and form of transportation, fixing his vehicle was imperative for his livelihood, but borrowing money from his mother was difficult.
“She doesn’t have a lot of extra money,” and she’s struggling with her own health issues, Fread said.
Fread has $62,460.79 in limbo. Evolve sent him a statement saying that they owe him about $300.
Fread originally decided to put his money in a Juno savings account due to a trusted friend’s advice. In the midst of health struggles, he was unable to work, and his friend sold him on Juno due to its high interest rates for savings accounts at the time and its FDIC security. Fread admitted that this friendship has since deteriorated, marking yet another loss tied to the shortfall.
Cody Williams, 34, from Illinois was saving up money for a down payment on a car he needed for work. When he lost access to his Yotta account, Williams was able to borrow money from his parents for the down payment, which he will need to pay back.
Williams saved up exactly $15,767.58. Evolve told him it doesn’t have any of his savings. “It’s so stressful,” Williams said about not knowing if he’ll ever get his money back.
In a recent and unfortunate life development, Williams’ wife was diagnosed with breast cancer. While they are in the process of meeting with oncologists and remain hopeful, Williams shared: “Now more than ever we need access to our savings.”
Ronnie Duke, 39, from Washington was also planning to purchase a car with his Yotta funds. Right as he narrowed down the perfect vehicle for his needs, his funds were frozen. Trusting in Yotta’s initial claim that the issue would likely be resolved promptly and not wanting to miss the opportunity, Duke financed the entire cost of the car thinking he’d have access to his $23,000 in savings soon. That was nearly a year ago, and Evolve has told him that, according to its records, it doesn’t have any of his money.
“I’ve been paying interest on that entire amount, and my payment is higher because I obviously couldn’t put that down payment … And with finances everything snowballs, right? So … I’m not able to put that money towards other things,” Duke said.
One of the many other things that Duke wishes he could put his money toward is his daughter’s medical bills. As the father of 19-month-old twins, Duke hoped he could fall back on his savings for unexpected childcare expenses.
“One of the twins has had several hospital visits, and she’s just fine now, but we racked up some medical bills,” Duke said.
Disrupted plans
Dylan Edwards, 30, from Missouri is getting married later this year and was planning to buy a house in June. While Edwards and his fiancé still hope to accomplish both milestones, the road there has become much more challenging.
“Now obviously [not having my savings] puts a lot more financial pressure on having to try to build up enough savings to come up with the down payment and still feel like I’m not living paycheck to paycheck,” Edwards said.
Edwards is out $19,387.88. Evolve told him it owes him $17.34.
Lott-Tillery’s plans to buy a house have been put on hold indefinitely. “I was going to use it to put a down payment on my first house. Obviously, now that I don’t have that money, there’s no house. Back to renting, so that sucks,” he said.
While Lott-Tillery is now renting a place of his own, when his funds were initially frozen, he had to move in with family for six months as he figured out his next steps.
Petcu’s plans to buy a home have not been completely derailed, but her budget has dwindled considerably.
“That’s a hefty amount that would cover a lot of closing costs. So it’s definitely … cutting into how much I can afford to spend,” Petcu said.
Zack Schuler, 29, from Arkansas had plans to leave a bad job right as his account with Juno was frozen. For months, he felt trapped in a “shitty job,” despite saving up around $40,000 that he’d hoped would give him the flexibility to quit and find a better workplace. He says Evolve told him it doesn’t have any of his money.
Trusting the system no more
So, who should be held accountable – the fintechs, the banks or a regulatory government agency? Opinions are mixed but many, such as Duke, feel that the fintech companies should be held responsible above all other parties.
“The fintech is the customer-facing entity that I signed up with and that I dealt with, and I feel should be held responsible because to me, they facilitated the entire operation,” Duke said.
Others, such as Williams, think the government needs to step up. “They allow these companies to use words like FDIC insured, and they allow them to promote themselves as a bank. With that, you have to act and function as a bank. So, I think there needs to be stronger regulation tracking the data,” Williams said.
Williams also noted that, in his experience, communicating with Yotta has been much easier than with Evolve, even messaging back and forth with Yotta’s CEO Adam Moelis. However, he has yet to get back any of his funds.
Many impacted are frustrated with the role the partner banks play in their frozen funds and unsatisfied with how the banks have handled their reconciliation efforts.
“When I called Evolve and Trust, one of the employees got angry enough to scream at me that my money was at Lineage and to call Lineage,” Fread said. When Fread contacted Lineage Bank, a customer service representative informed him that his money was not there either and to “talk to their lawyers.”
Getting tossed from one partner bank to another has been a common experience for impacted end-users, from Evolve Bank & Trust to Lineage Bank, AMG National Trust or American Bank. While some of these referrals have led to reconciliations, many have not, such as in Fread’s case.
Impacted end-users voiced their frustrations with the American banking system during the latest Synapse bankruptcy hearing. “So, who do we turn to? … What regulatory agency is taking care of us? What – who in the justice system is going to take care of us when we need it?” Petcu asked the court.
Joshua Nelson, 39, from Tennessee is disillusioned by fintechs and the FDIC. “I would be extremely hesitant to use any type of platform like this in the future. Even if they say they’re FDIC insured. That doesn’t mean anything to me anymore,” Nelson said.
Nelson has $20,008.32 tied up in Yotta, but Evolve told him it only has about $2.30 of it, according to its reconciliation efforts.
Nelson compared the government’s hands-off approach in the face of so many Americans losing their savings to “having a fire station next door, and your house is burning, and the firefighters are just sitting in the fire station and it’s like, hey, you said that if my house caught on fire, you guys would show up and put it out, and they’re like, well, you know, we don’t. If it gets too bad, we might step up. But if we are on our way, we’re not going to tell you that we’re on our way.”
Dimitri Souffan, 41, from California has $15,728 in a Yotta account he can’t access and says Evolve claims to have only $0.93 of it. “I thought that FDIC meant something,” Souffan said.
What the companies have to say
When asked for comment regarding the many lives that have been negatively impacted by the shortfall, a Yotta spokesperson stated: “We will not stop fighting until every penny is returned and are doing everything in our power to expedite the return of funds. Yotta is not a bank and has never held funds.”
Yotta also pointed to Evolve as the party responsible for the shortfall – a claim that is outlined in a complaint filed against the bank with the Northern District Court of California in September of last year.
An Evolve spokesperson acknowledged impacted customers’ frustration and expressed gratitude for their patience as they continue to navigate the complex reconciliation process. Evolve has hired Ankura, a consulting company, to manage the reconciliation process, using Federal Reserve and Evolve transaction data which Evolve says has revealed errors in Synapse’s ledgers.
“The puzzle is not complete. The goal is to identify where all end-users’ funds are held, and we are working hard to put the last pieces together. That requires all the Synapse ecosystem banks – AMG, Lineage, and American – to share the transactional data necessary to complete the analysis. While we had made some initial headway, the Synapse ecosystem banks have not produced the data that Evolve has requested, and that Ankura needs, to complete the reconciliation for the other institutions,” Evolve’s spokesperson said.
Regarding Yotta’s claim against Evolve, the bank’s spokesperson said that, according to their policies, they do not comment on active litigation. Evolve filed a motion to dismiss Yotta’s lawsuit in December of last year.
A spokesperson for Lineage bank responded that approximately 97% of the funds it held have been returned to Synapse customers since Synapse declared bankruptcy and that the bank will continue to do its part in returning remaining funds to the respective customers.
“The critical question that remains is ‘why do the Synapse-generated trial balances exceed the collective balance of Synapse-related funds held at the banks?’” Lineage’s spokesperson said.
Juno did not respond to the Reynolds Center’s request for comment.
A small win amid the chaos
Sydney, 28, from Montana is among the lucky minority who received most of her funds back from Evolve earlier this month, even though for nearly five months the bank claimed to have none of her money. For Sydney, who asked that her last name remain private because most of her savings were from a workplace harassment case settled outside of court, losing access to that money was heavy for her.
“I feel so just, like, almost embarrassed that I took that money that I won for that situation that I was in and then now it’s just gone,” Sydney said before receiving the good news about her revised reconciliation. She received about 93% of the approximately $21,000 she had in her savings account with Yotta.
Evolve’s communication email to Sydney provided the following explanation: “Evolve initiated a process to share information with Synapse ecosystem banks, which has led to identification of additional funds held at Evolve, which we are returning to you.”
Other impacted end-users are unsure why their savings accounts didn’t make the cut.
During the next hearing on April 7th, trustee Jelena McWilliams will provide an update on the shortfall and whether Synapse’s data will continue to be preserved once the bankruptcy case is finalized. Storing and maintaining the enormous amount of data is extremely costly, and none of the involved entities have stepped up to cover the cost. The preservation of this user information will be crucial for any future reconciliation efforts outside of bankruptcy court.
As the next bankruptcy hearing looms, those impacted by the Synapse collapse are left clinging to hope – hope that their stories will matter and that a system claiming to protect its users will eventually deliver on its promise.
