Synapse Financial Technologies
 | |
| Company type | Private company |
|---|---|
| Industry | Financial services |
| Founded | April 14, 2014 |
| Founder | Sankaet Pathak[1] |
| Defunct | April 2024 |
| Fate | Bankrupt |
| Headquarters | , |
Area served | United States |
Key people | Sankaet Pathak (CEO)[1] |
| Products | banking as a service to other financial technology companies |
Number of employees | 157 (2024) |
| Website | synapsefi |
Synapse Financial Technologies, Inc. was an American banking as a service company based in San Francisco. It was founded in 2014 and filed for bankruptcy in April 2024.[2][3]
History
[edit]Synapse was founded in 2014 as a banking as a service platform.[4] The company claimed to keep customer deposits in FDIC insured bank accounts, and argued that this provided a comparable level of depositor protection to conventional bank accounts. However, since Synapse was a non-bank company, it did not provide FDIC protection for depositors against its own bankruptcy.[5]
The company was backed by Andreessen Horowitz and raised $51 million from investors.[6] The company had 100 direct business relationships with financial technology companies including Dave and Honey,[1] indirectly serving 10 million retail customers through those relationships.[7][8] It was one of the 100 fastest growing financial services companies in the United States in 2022.[9] The company was valued as a unicorn in 2024.[10]
The company filed for chapter 11 bankruptcy protection in April 2024.[11] Following the bankruptcy declaration, "tens of thousands of U.S. businesses and consumers" lost access to Synapse's services, leaving questions as to the location of funds.[3][7][12] In May 2024, former FDIC Chair Jelena McWilliams, appointed as bankruptcy trustee, said there was a shortfall between Synapse’s records and those of the banks, estimated at $65 million to $96 million.[5][6]
The CEO of Yotta Savings – a fintech company which relied on Synapse to manage customer deposits – released financial data in November 2024 showing that 13,725 former customers lost deposited money due to the Synapse bankruptcy. They were refunded $11.8 million, a fraction of their $64.9 million deposits.[13]
As of November 2024[update], a lawsuit was in progress against four of Synapse's banking partners, seeking class action status in regard to losses by those affected by Synapse's actions.[14]
References
[edit]- ^ a b c Kauflin, Jeff (April 1, 2020). "Broken Synapse: Why Employees And Customers Are Fleeing This Andreessen-Backed Fintech Startup". Forbes. Retrieved 2024-11-23.
- ^ Azevedo, Mary Ann (May 25, 2024). "Synapse, backed by a16z, has collapsed, and 10M consumers could be hurt". TechCrunch. Retrieved 2024-11-23.
- ^ a b Sweet, Ken (May 22, 2024). "Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans' deposits". AP News. Retrieved 2024-11-23.
- ^ "What Synapse's bankruptcy means for the BaaS model". American Banker. 2024-04-23. Retrieved 2025-04-06.
- ^ a b Mason, Emily (17 June 2024). "Is Your Money Really Safe In An 'FDIC-Insured' Fintech Account?". Forbes.
- ^ a b Mason, Emily (24 May 2024). "Synapse Management Ousted As Fintech Customers Remain Frozen Out Of Their Accounts". Forbes.
- ^ a b Sweet, Ken (23 May 2024). "Abrupt bankruptcy of financial middleman Synapse freezes bank accounts of tens of thousands of U.S. businesses and consumers". Fortune.
- ^ Weinberger, Evan (June 12, 2024). "Andreessen-Backed Fintech's Meltdown Shows Bank Middlemen Risks". Bloomberg Law.
- ^ "Meet the Inc. 5000 Companies: Winning in a Time of Change and Achieving Spectacular Growth". Inc.com. Archived from the original on 2025-02-19. Retrieved 2025-05-20.
- ^ Garfinkle, Leo Schwartz,Allie. "The spectacular Synapse collapse: Inside the ugliest divorce in fintech, which left $200 million in customer money frozen". Fortune. Retrieved 2025-04-24.
{{cite web}}: CS1 maint: multiple names: authors list (link) - ^ Sweet, Ken (May 22, 2024). "Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans' deposits". AP News. Retrieved 2024-11-23.
- ^ Chakravarty, Rajashree (October 30, 2024). "5 lessons learned from Synapse's collapse". Banking Dive. Retrieved November 23, 2024.
- ^ Son, Hugh (November 22, 2024). "'I have no money': Thousands of Americans see their savings vanish in Synapse fintech crisis". CNBC. Retrieved 2024-12-11.
- ^ Chakravarty, Rajashree (November 27, 2024). "Synapse partner banks hit with lawsuit over fund mismanagement". Banking Dive. Retrieved 2024-12-16.
External links
[edit]- Official website, archived from the original in 2024
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