Synapse Financial Technologies Bankruptcy Lawsuit: Owed Money?

Attorneys working with ClassAction.org are looking to file a class action lawsuit on behalf of consumers who believe they are not receiving the full amount they’re owed on accounts affected by the bankruptcy at Synapse Financial Technologies.

They suspect that Evolve Bank & Trust, Lineage Bank, American Bank NA and AMG National Trust Bank—four banks that partnered with Synapse’s fintech customers—could be underpaying people whose accounts were frozen as a result of the bankruptcy.

However, reports have surfaced that Synapse’s ledgers were inaccurate, failing to correctly report how much customers held in their fintech apps. This, combined with the fact that users’ money was pooled across a network of banks, is making it difficult for the banks to determine how much money is actually owed to consumers. Further, a recent report suggests that a cease-and-desist order issued to Evolve Bank and a consent order issued to Lineage Bank indicate that the banks were already aware of compliance issues with Synapse prior to its collapse and should have had a plan in place to make consumers whole in the event of such a failure.

A class action lawsuit may be able to hold these banks liable and help consumers get back the full amount they’re owed—but the attorneys first need to hear from people who may have been affected as they determine whether a lawsuit can be filed.

Fintech Wallets Frozen Following Synapse Financial Technologies Bankruptcy

The April 2024 bankruptcy of Synapse Financial Technologies, which acts as an intermediary between non-bank financial technology companies and the banks that hold their customers’ funds, resulted in millions of consumers with nearly $160 million in deposits getting locked out of their accounts starting on May 11.

Users reported that they had no access to their funds for months—with some claiming the frozen funds caused them to incur overdraft fees, have to take out loans or borrow money from friends and family, or be otherwise unable to use money they needed to make ends meet.

While consumers’ accounts remained frozen, the banks attempted to reconcile inconsistent records of where the money was and who it belonged to. Some of the affected funds were held in “for benefit of,” or FBO, accounts, meaning money belonging to many end users was pooled together and held in a single account at a bank. Court records indicate that the companies and banks involved have disagreed on which company held customers’ funds—with some users complaining that the fintech companies, Synapse and the banks were blaming each other instead of taking responsibility.

A court-appointed trustee for the Synapse bankruptcy noted in a June 2024 court filing that an estimated $65 million to $95 million of consumers’ funds was still missing.

Fintech Customers Claim They’re Getting Shorted Following Synapse Failure

In late October 2024, Evolve Bank stated that it would soon begin issuing payments to fintech end users who were affected by the Synapse bankruptcy, but some customers are complaining that the amounts they’re being paid are much lower than what they should be getting.

One Yotta user posted an image on Reddit showing that their Evolve payment was estimated to be $2.78 despite having a “Synapse Ecosystem Balance” of $26,735.23. Another user replied saying they were getting “a measly 11$ [sic]” out of $26,000.

Another Yotta user said on Reddit that they were “in shock” after finding out that they would receive only $500 out of $282,000 that they believed was safely invested in a high-interest savings account. That user and many others said that they were under the impression their funds were insured by the Federal Deposit Insurance Corporation (FDIC) and were surprised to find out that they may not ever see some of their money.

Some of the other banks have already issued payments to consumers, but some users questioned whether the amounts were correct in light of reports of missing funds, and others pointed out that it was unclear whether they received what they were owed since multiple banks were involved.

How Could a Lawsuit Help?

A class action lawsuit could help hold the banks responsible for returning the money owed to consumers.

What You Can Do

After you get in touch, an attorney or legal representative may reach out to you directly to ask you some questions and explain how you may be able to help get a class action lawsuit started. It costs nothing to speak with someone and you’re not obligated to take legal action if you don’t want to.

Before commenting, please review our comment policy.