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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.[2][3]

History

Synapse was founded in 2014 as a banking as a service platform.[4] 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.[5]

The company was backed by Andreessen Horowitz and raised $51 million from investors.[6] The company had 100 direct business relationships with financial technology companies including Dave and Honey,[1] indirectly serving 10 million retail customers through those relationships.[7][8] It was one of the 100 fastest growing financial services companies in the United States in 2022.[9] 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.[10]

The company was valued as a unicorn in 2024.[11]

The company filed for Chapter 11 bankruptcy protection in April 2024.[12] 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.[3][7][13] 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.[5][6]

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.[14]

As of November 2024, 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.[15]

References

  1. ^ a b c Kauflin, Jeff (April 1, 2020). “Broken Synapse: Why Employees And Customers Are Fleeing This Andreessen-Backed Fintech Startup”. Forbes. Archived from the original on 2025-11-28. Retrieved 2024-11-23.
  2. ^ Azevedo, Mary Ann (May 25, 2024). “Synapse, backed by a16z, has collapsed, and 10M consumers could be hurt”. TechCrunch. Retrieved 2024-11-23.
  3. ^ a b Sweet, Ken (May 22, 2024). “Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans’ deposits”. AP News. Retrieved 2024-11-23.
  4. ^ “What Synapse’s bankruptcy means for the BaaS model”. American Banker. 2024-04-23. Retrieved 2025-04-06.
  5. ^ a b Mason, Emily (17 June 2024). “Is Your Money Really Safe In An ‘FDIC-Insured’ Fintech Account?”. Forbes.
  6. ^ a b Mason, Emily (24 May 2024). “Synapse Management Ousted As Fintech Customers Remain Frozen Out Of Their Accounts”. Forbes.
  7. ^ a b Sweet, Ken (23 May 2024). “Abrupt bankruptcy of financial middleman Synapse freezes bank accounts of tens of thousands of U.S. businesses and consumers”. Fortune.
  8. ^ Weinberger, Evan (June 12, 2024). “Andreessen-Backed Fintech’s Meltdown Shows Bank Middlemen Risks”. Bloomberg Law.
  9. ^ “Meet the Inc. 5000 Companies: Winning in a Time of Change and Achieving Spectacular Growth”. Inc.com. Archived from the original on 2025-02-19. Retrieved 2025-05-20.
  10. ^ Michael Roddan (2024-11-23). “Andreessen Investor Fought to Keep Synapse CEO Before Fintech Collapsed”. The Information.{{cite news}}: CS1 maint: deprecated archival service (link)
  11. ^ Garfinkle, Allie; Schwartz, Leo. “The spectacular Synapse collapse: Inside the ugliest divorce in fintech, which left $200 million in customer money frozen”. Fortune. Archived from the original on 2025-03-07. Retrieved 2025-04-24.
  12. ^ Sweet, Ken (May 22, 2024). “Abrupt shutdown of financial middleman Synapse has frozen thousands of Americans’ deposits”. AP News. Retrieved 2024-11-23.
  13. ^ Chakravarty, Rajashree (October 30, 2024). “5 lessons learned from Synapse’s collapse”. Banking Dive. Retrieved November 23, 2024.
  14. ^ Son, Hugh (November 22, 2024). “‘I have no money’: Thousands of Americans see their savings vanish in Synapse fintech crisis”. CNBC. Retrieved 2024-12-11.
  15. ^ Chakravarty, Rajashree (November 27, 2024). “Synapse partner banks hit with lawsuit over fund mismanagement”. Banking Dive. Retrieved 2024-12-16.