by Brian Shilhavy, Health Impact News:
The technology that America’s infrastructure is now hopelessly dependent upon continues to fail, as it was reported this week that one of the most popular FinTech (Financial Technology) apps, which are supposed to “reinvent” banking by getting rid of such pesky nuisances such as over-draft charges, having to wait until your paycheck clears before having access to funds, and many other wonderful Big Tech promises that have convinced swindled tens of millions of people to open accounts on these FinTech apps, has left millions of customers today without access to their funds on deposit.
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The collapse of a fintech firm with 10 million users has left many Americans without access to their money
A dispute between a fintech startup and its banking partners has ensnared potentially millions of Americans, leaving them without access to their money for nearly two weeks, according to recent court documents.
Since last year, Synapse — an Andreessen Horowitz-backed startup that serves as a middle-man between customer-facing fintech brands and FDIC-backed banks — has had disagreements with several of its partners about how much in customer balances it owed.
The situation deteriorated in April after Synapse declared bankruptcy following the exodus of several key partners. On May 11, Synapse cut off access to a technology system that enabled lenders, including Evolve Bank & Trust, to process transactions and account information, according to the filings.
That has left users of several fintech services stranded with no access to their funds, according to testimonials filed this week in a California bankruptcy court.
One customer, a Maryland teacher named Chris Buckler, said in a May 21 filing that his funds at crypto app Juno were locked because of the Synapse bankruptcy.
“I am increasingly desperate and don’t know where to turn,” Bucker wrote. “I have nearly $38,000 tied up as a result of the halting of transaction processing. This money took years to save up.”
Until recently, Synapse, which calls itself the biggest “banking as a service” provider, helped a wide swath of the U.S. fintech universe provide services like checking accounts and debit cards. Former partners included Mercury, Dave and Juno, well-known fintech firms that catered to segments including startups, gig workers and crypto users.
Synapse had contracts with 20 banks and 100 fintechs, resulting in about 10 million end users, according to an April filing from founder and CEO Sankaet Pathak. (Source.)
These funds on deposit with these FinTech apps are NOT FDIC insured. And a judge just ruled that if you lost your money on this app, too bad.
As I have been warning for over a year and a half, if you trust in the technology, you risk losing everything as a reward for your faith in Big Tech, as the Big Tech Crash that started in 2022 just after the demise of FTX, with its billionaire founder now sitting in prison, is now accelerating.
Federal bank regulators are not coming to rescue the thousands of fintech customers who have lost access to their money during the unfolding bankruptcy of banking-as-a-service provider Synapse Financial Technologies or the millions more who are at risk.
That was the grim news delivered in a five-hour hearing today before U.S. Bankruptcy Court Judge Martin R. Barash, of the Central District of California.
Earlier this week, he’d urged federal regulators to step in to protect “everyday people” and prevent a “potential disaster.”
While the fintech industry is new and largely unregulated, he observed, the customers should be thought of as “depositors.”
The most immediate cause of pain for individual consumers is a dispute between bankrupt Synapse and one of its bank partners, Arkansas-based Evolve Bank & Trust.
That disagreement has left customers of fintechs Yotta Technologies, Juno Finance and Copper Banking unable to access the money in their accounts or use the credit and debit cards tied to them since May 11th.
But Assistant U.S. Attorney Elan Levey, representing the U.S. Trustee (the arm of the Justice Department involved in bankruptcy cases), said she had investigated Barash’s idea and federal banking regulators couldn’t intervene.
“It’s my understanding that the FDIC insurance coverage is only available in the event of a bank failure,” she said. (Source.)
Some reactions from depositors who cannot access their funds.
Among the affected customers is Mark Egidi, a 39-year-old mechanic from Phoenix.
He switched his direct deposit to Yotta for its gamified savings rewards and FDIC insurance.
Now, with an 11-month-old child, recent hand surgery, and no access to his funds, Egidi faces severe financial strain. “At this moment in time, it is absolutely every penny that I have.” (Source.)
One user said they had “over $60,000” tied up in an account that was unreachable. Another, a single mom, had just bought a home and couldn’t access the funds to make the first mortgage payment. A third had saved emergency funds for their family: “I feel powerless and unable to do anything. I’m so upset.” (Source.)
Read more accounts from people who lost access to their funds here.
And this isn’t the first time people have been unable to withdraw their funds from a FinTech app. Here is a story that is 2 years old about Chime.
Read More @ HealthImpactNews.com
