Nearly $109 million in deposits held for fintech Yotta’s customers vanished in Synapse collapse, bank says

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Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved. A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday. About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said. In a letter sent Thursday, bankruptcy trustee Jelena McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse. Tsingha25 | Istock | Getty Images

Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.

A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.

About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said. It added that neither customers nor Evolve received funds in that time period.

“These irregularities in Synapse’s ledgering of Yotta end user funds are just one example of the many discrepancies that Evolve has observed,” the bank said. “A detailed investigation of what happened to these funds, or alternatively, why the Synapse-provided ledger reflected money movement that did not actually occur, must be undertaken.”

Evolve, one of the key players in a deepening predicament that has left more than 100,000 fintech customers locked out of their bank accounts since May 11, has been attempting to piece together with other banks a record of who is owed what. Its former partner Synapse, which connected customer-facing fintech apps to FDIC-backed banks, filed for bankruptcy in April amid disputes about customer balances.

But Evolve itself was reprimanded by the Federal Reserve 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 improve oversight of its fintech program. The Fed said the enforcement action was separate from the Synapse bankruptcy.

Evolve has been trying to separate itself from Synapse

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