Synapse bankruptcy trustee says $85 million of customer savings is missing in fintech meltdown

cnbc.com:

There is an $85 million shortfall between what partner banks of fintech middleman Synapse are holding and what depositors are owed, according to the court-appointed trustee in the Synapse bankruptcy.

Customers of fintech firms that used Synapse to link up with banks had $265 million in balances. But the banks themselves only had $180 million associated with those accounts, trustee Jelena McWilliams said in a report filed late Thursday.

The missing funds explain what is at the heart of the worst meltdown in the U.S. fintech sector since its emergence in the years after the 2008 financial crisis. More than 100,000 customers of a diverse set of fintech companies have been locked out of their savings accounts for nearly a month after the failure of Synapse, an Andreessen Horowitz-backed startup, amid disagreements over user balances.

While Synapse and its partners, including Evolve Bank & Trust, have lobbed accusations of improperly moving balances or keeping incorrect ledgers at each other in court filings, McWilliams' report is the first outside attempt to determine the scope of missing funds in this mess.

Since being named trustee on May 24, McWilliams has worked with four banks — Evolve, American Bank, AMG National Trust and Lineage Bank — to reconcile their various ledgers so customers could regain access to their funds.

But the banks need much more information to complete the project, including understanding how a Synapse brokerage and lending business may have impacted fund flows, said McWilliams. She said Synapse apparently commingled funds among several institutions, using multiple banks to serve the same companies.

What's worse, it's still unclear what happened to the missing funds, she said.

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