Synapse's banking middleware lost track of whose money was whose — then it went bankrupt

Synapse Financial Technologies was banking-as-a-service middleware: it let fintech apps like Yotta, Juno and Copper offer savings and checking products without becoming banks themselves, by routing customer deposits through partner banks including Evolve Bank & Trust, Lineage Bank and American Bank. Synapse kept its own ledger of which end user owned which dollar across those partner banks, since the banks themselves only saw pooled custodial accounts, not individual customers.

Synapse filed for Chapter 11 bankruptcy in April 2024 after a partnership with Evolve deteriorated and a planned sale of its assets to payments company TabaPay fell through in May, when Evolve refused to cover a shortfall the two sides believed existed. Roughly $160-200 million in customer deposits, held across the partner banks, froze the same week for more than 100,000 end users of the fintech apps built on Synapse's rails.

A court-appointed trustee, former FDIC chair Jelena McWilliams, reported in June 2024 that Synapse's ledger and the partner banks' own records could not be reconciled: customers were owed roughly $265 million but the banks held around $180 million, leaving a gap trustee filings pegged at $65 million to $95 million depending on the reconciliation method. No single party's books could say with confidence where the missing money had gone.

Partner banks disbursed most of the frozen funds through late 2024, but the shortfall was never fully resolved. In June 2024 the Federal Reserve issued a public enforcement action against Evolve for failing to maintain adequate risk-management and anti-money-laundering controls over its fintech partnerships, barring it from onboarding new partners without prior approval. In November 2025 the Consumer Financial Protection Bureau allocated $46.2 million from its Civil Penalty Fund toward reimbursing Synapse/Evolve customers who were never made whole.