{{Short description|American banking as a service company}} {{Infobox company | name = Synapse Financial Technologies | logo = Synapsefi logo.svg | logo_caption = | logo_upright = <!-- default: 1 --> | logo_alt = | type = Private company | industry = Financial services | founded = {{Start date |2014|04|14}} | founder = Sankaet Pathak<ref name="Forbes2020-04-01"/> | defunct = {{End date and age |2024|04}} | fate = Bankrupt | hq_location_city = San Francisco | hq_location_country = United States | area_served = United States | key_people = Sankaet Pathak (CEO)<ref name="Forbes2020-04-01"/> | products = banking as a service to other financial technology companies | owner = <!-- or: owners = --> | num_employees = 157 | num_employees_year = 2024 | parent = | website = {{URL|https://synapsefi.com/}} {{webarchive |url=https://web.archive.org/web/20240509133415/https://synapsefi.com/ |date=May 9, 2024 }} }}
'''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.<ref>{{Cite web |last=Azevedo |first=Mary Ann |date=May 25, 2024 |title=Synapse, backed by a16z, has collapsed, and 10M consumers could be hurt |url=https://techcrunch.com/2024/05/25/with-a16z-backed-synapses-collapse-baas-fintech-is-a-mess-and-10-million-consumers-could-be-hurt/ |access-date=2024-11-23 |website=TechCrunch |language=en-US}}</ref><ref name="APSynapse2024-05-22">{{Cite news |last=Sweet |first=Ken |date=May 22, 2024 |title=Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans' deposits |url=https://apnews.com/article/synapse-evolve-bank-fintech-accounts-frozen-07ecb45f807a8114cac7438e7a66b512 |access-date=2024-11-23 |work=AP News |language=en}}</ref>
== History == Synapse was founded in 2014 as a banking as a service platform.<ref>{{Cite web |date=2024-04-23 |title=What Synapse's bankruptcy means for the BaaS model |url=https://www.americanbanker.com/news/what-synapses-bankruptcy-means-for-the-baas-model |access-date=2025-04-06 |website=American Banker |language=en}}</ref> 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.<ref name="Forbes2024-06-17" />
The company was backed by Andreessen Horowitz and raised $51 million from investors.<ref name=":0" /> The company had 100 direct business relationships with financial technology companies including Dave and Honey,<ref name="Forbes2020-04-01">{{Cite magazine |last=Kauflin |first=Jeff |date=April 1, 2020 |title=Broken Synapse: Why Employees And Customers Are Fleeing This Andreessen-Backed Fintech Startup |url=https://www.forbes.com/sites/jeffkauflin/2020/04/01/broken-synapse-why-employees-and-customers-are-fleeing-this-andreessen-backed-fintech-startup/ |archive-url=https://web.archive.org/web/20251128182246/https://www.forbes.com/sites/jeffkauflin/2020/04/01/broken-synapse-why-employees-and-customers-are-fleeing-this-andreessen-backed-fintech-startup/|archive-date=2025-11-28 |access-date=2024-11-23 |magazine=Forbes |language=en}}</ref> indirectly serving 10 million retail customers through those relationships.<ref name=ref1/><ref>{{Cite web |last=Weinberger |first=Evan |date=June 12, 2024 |title=Andreessen-Backed Fintech's Meltdown Shows Bank Middlemen Risks |url=https://news.bloomberglaw.com/banking-law/andreessen-backed-fintechs-meltdown-shows-bank-middlemen-risks |website=Bloomberg Law}}</ref> It was one of the 100 fastest growing financial services companies in the United States in 2022.<ref>{{Cite news |title=Meet the Inc. 5000 Companies: Winning in a Time of Change and Achieving Spectacular Growth |url=https://www.inc.com/inc5000/2022 |archive-url=https://web.archive.org/web/20250219045518/https://www.inc.com/inc5000/2022 |archive-date=2025-02-19 |access-date=2025-05-20 |work=Inc.com |language=en}}</ref> In 2023, as "discrepancies in Synapse’s ledgers were piling up," the company's board discussed removing Sankaet Pathak from his role as CEO, but investors from Andreessen Horowitz argued against this.<ref name="roddan-ceo">{{cite news|url=https://www.theinformation.com/articles/andreessen-investor-fought-to-keep-synapse-ceo-before-fintech-collapsed|url-access=subscription|author=Michael Roddan|title=Andreessen Investor Fought to Keep Synapse CEO Before Fintech Collapsed|date=2024-11-23|archive-url=https://archive.today/20250705223317/https://www.theinformation.com/articles/andreessen-investor-fought-to-keep-synapse-ceo-before-fintech-collapsed|archive-date=2025-07-05|website=The Information}}</ref>
The company was valued as a unicorn in 2024.<ref>{{Cite web |last=Garfinkle |first=Allie|first2=Leo |last2=Schwartz|title=The spectacular Synapse collapse: Inside the ugliest divorce in fintech, which left $200 million in customer money frozen |url=https://fortune.com/2025/03/07/synapse-evolve-mercury-bankruptcy-lawsuits/ |archive-url=https://web.archive.org/web/20250307175313/https://fortune.com/2025/03/07/synapse-evolve-mercury-bankruptcy-lawsuits/|archive-date=2025-03-07 |access-date=2025-04-24 |website=Fortune |language=en}}</ref>
The company filed for Chapter 11 bankruptcy protection in April 2024.<ref name="APSynapse2024-05-222">{{Cite news |last=Sweet |first=Ken |date=May 22, 2024 |title=Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans' deposits |url=https://apnews.com/article/synapse-evolve-bank-fintech-accounts-frozen-07ecb45f807a8114cac7438e7a66b512 |access-date=2024-11-23 |work=AP News |language=en}}</ref> 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.<ref name="APSynapse2024-05-22"/><ref name=ref1>{{Cite web|url=https://fortune.com/2024/05/23/bankruptcy-financial-middleman-synapse-freezes-bank-accounts-thousands-us-businesses-consumers/|title=Abrupt bankruptcy of financial middleman Synapse freezes bank accounts of tens of thousands of U.S. businesses and consumers|last=Sweet|first=Ken|date=23 May 2024|website=Fortune}}</ref><ref>{{Cite web |last=Chakravarty |first=Rajashree |date=October 30, 2024 |title=5 lessons learned from Synapse's collapse |url=https://www.bankingdive.com/news/5-lessons-learned-from-synapses-collapse/731543/ |access-date=November 23, 2024 |website=Banking Dive |language=en-US}}</ref> 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.<ref name="Forbes2024-06-17">{{Cite magazine |url=https://www.forbes.com/sites/emilymason/2024/06/17/is-your-money-really-safe-in-an-fdic-insured-fintech-account/|title=Is Your Money Really Safe In An ‘FDIC-Insured’ Fintech Account?|last=Mason|first=Emily|date=17 June 2024|magazine=Forbes}}</ref><ref name=":0">{{Cite web|url=https://www.forbes.com/sites/emilymason/2024/05/24/synapse-management-ousted-as-fintech-customers-remain-frozen-out-of-their-accounts/|title=Synapse Management Ousted As Fintech Customers Remain Frozen Out Of Their Accounts.|last=Mason|first=Emily|date=24 May 2024|website=Forbes}}</ref>
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.<ref name="CNBC2024-11-22">{{Cite news |last=Son |first=Hugh |date=November 22, 2024 |title='I have no money': Thousands of Americans see their savings vanish in Synapse fintech crisis |url=https://www.cnbc.com/2024/11/22/synapse-bankruptcy-thousands-of-americans-see-their-savings-vanish.html |access-date=2024-12-11 |work=CNBC}}</ref>
{{As of|2024|11}}, 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.<ref>{{Cite web |last=Chakravarty |first=Rajashree |date=November 27, 2024 |title=Synapse partner banks hit with lawsuit over fund mismanagement |url=https://www.bankingdive.com/news/synapse-partner-banks-evolve-amg-lineage-american-bank-hit-with-lawsuit-over-fund-mismanagement/734219/ |access-date=2024-12-16 |website=Banking Dive |language=en-US}}</ref>
== References == {{reflist}}
== External links == * [https://web.archive.org/web/20240422220640/https://synapsefi.com/ Official website], archived from [https://synapsefi.com/ the original] in 2024
Category:Failed financial technology companies Category:Companies that filed for Chapter 11 bankruptcy in 2024
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