How thousands of Americans got caught in fintech’s false promise and lost access to bank accounts

[DrQ]

How thousands of Americans got caught in fintech’s false promise and lost access to bank accounts​

• For customers, fintech promised the best of both worlds: The innovation, ease of use and fun of the newest apps combined with the safety of government-backed accounts held at real banks.
• The collapse of middleman Synapse has revealed fintech’s promise of safety as a mirage. More than 100,000 Americans with $265 million in deposits have been locked out of their accounts.
• The implications of this disaster may be far-reaching. The most popular banking apps in the country, including Block’s Cash App, PayPal and Chime, partner with banks instead of owning them.
• CNBC reached out to fintech customers whose lives have been upended by the Synapse debacle. They all believed their money was protected by an FDIC safety net.

https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-promise.html

 

[TolmiePeak]

They will all be made whole. This story is overblown. Fidelity, Schwab, and Vanguard are all Fintech as well.

 

[DrQ]

They will all be made whole. This story is overblown. Fidelity, Schwab, and Vanguard are all Fintech as well.

Did you read the story?

In your examples a receiver would be quickly appointed to take over and conduct "business as usual"

In this case, a company providing infrastructure to other start-up apps failed and it looks as if there were no alternatives.

 

[TolmiePeak]

Did you read the story?

In your examples a receiver would be quickly appointed to take over and conduct "business as usual"

In this case, a company providing infrastructure to other start-up apps failed and it looks as if there were no alternatives.

The story was fake news and a perfect example of why people don't trust the media now days. If the customer funds were deposited into an FDIC bank the is zero chance these customers won't be made whole. Don't spread fake news.

 

[DrQ]

The story was fake news and a perfect example of why people don't trust the media now days. If the customer funds were deposited into an FDIC bank the is zero chance these customers won't be made whole. Don't spread fake news.

The story doesn't claim that they have lost their money, they have lost ACCESS to their money.

Their money is safe in an FDIC protected account, it's just that their cash app no longer has a critical part of its infrastructure to make the jump between the app and the bank, which holds the monies for the app in one large account rather than smaller discrete accounts which would let the user contact the bank directly.

 

[TolmiePeak]

This is from the article.... Complete nonsense.

In a post-Synapse update, the FDIC made it clear that the failure of nonbanks won’t trigger FDIC insurance, and that even when fintechs partner with banks, customers may not have their deposits covered.

The FDIC’s exact language about whether fintech customers are eligible for coverage: “The short answer is: it depends.”

 

[tombanjo]

The TLDR - The failure of "Synapse" means the individual accounts are not accessible, as Synapse kept track (theoretically) of whose money was in what giant, single bank account. Since the bank with the single giant account has not failed, it is not a FDIC issue.

Imagine, at your work you have a "Christmas Club" (For all you ancient readers), and different employees give Sally from accounting different amounts each week to save for a payout before Christmas. Sally carefully invests that money in a single 4% savings account. Sally gets run over by a bus. The money is safe, but no one has access to it, and no one knows how much each person put in and how much each person should get out. It's not the banks problem. Its the problem that Sally had no clear records or plans in case anything happened, which then did happen.

https://www.cnbc.com/2024/06/21/synapse-collapse-nearly-109m-in-yotta-customer-deposits-vanish.html

 

[TolmiePeak]

The TLDR - The failure of "Synapse" means the individual accounts are not accessible, as Synapse kept track (theoretically) of whose money was in what giant, single bank account. Since the bank with the single giant account has not failed, it is not a FDIC issue.

Imagine, at your work you have a "Christmas Club" (For all you ancient readers), and different employees give Sally from accounting different amounts each week to save for a payout before Christmas. Sally carefully invests that money in a single 4% savings account. Sally gets run over by a bus. The money is safe, but no one has access to it, and no one knows how much each person put in and how much each person should get out. It's not the banks problem. Its the problem that Sally had no clear records or plans in case anything happened, which then did happen.

https://www.cnbc.com/2024/06/21/synapse-collapse-nearly-109m-in-yotta-customer-deposits-vanish.html

If Synapse had no clear records why didn't customers draw out more funds than they had in their account? I call bs on this whole thing.

 

[tombanjo]

• Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.
• A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.
• About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said.

 

[Ralph Sir Edward]

Sounds like a $107 million "Hack job" to me.

 

[jp10558]

This reads to me like Synapse was doing an SBX kind of thing and probably illegally deleted their records to try and hide that fact, while the owner fled the country or something.

 

[DrQ]

A fintech collapse is rippling through a small corner of the banking world​

A fintech collapse is rippling through a small corner of the banking world

The unraveling of fintech upstart Synapse is rippling through a small corner of the banking world, leaving thousands of customers without access to their money and a mystery about millions of dollars that went missing.

finance.yahoo.com

 

[emeryjre]

Another day
Another new way to steal someone's money

 

[DrQ]

What Happens When Your Bank Isn’t Really a Bank and Your Money Disappears?​

What Happens When Your Bank Isn’t Really a Bank and Your Money Disappears?

For close to a century, putting your savings into a federally insured bank has been a sure thing: If the institution fails, up to $250,000 of your money will be protected. What if it isn’t anymore? The promise of bank insurance — a tenet of U.S. consumer protection since the Great Depression —...

www.yahoo.com

 

[DrQ]

‘I have no money’: Thousands of Americans see their savings vanish in Synapse fintech crisis​

• Thousands of Americans will receive little or nothing from savings accounts that were locked during the collapse of fintech middleman Synapse.
• Customers believed the accounts were backed by the full faith and credit of the U.S. government.
• CNBC spoke to a dozen customers caught in the predicament, people who have lost sums ranging from $7,000 to well over $200,000.
• While there’s not yet a full tally of those left shortchanged, at fintech Yotta alone, 13,725 customers say they are being offered a combined $11.8 million despite putting in $64.9 million in deposits.

For 15 years, former Texas school teacher Kayla Morris put every dollar she could save into a home for her growing family.​

​

When she and her husband sold the house last year, they stowed away the proceeds, $282,153.87, in what they thought of as a safe place — an account at the savings startup Yotta held at a real bank.​

​

Morris, like thousands of other customers, was snared in the collapse of a behind-the-scenes fintech firm called Synapse and has been locked out of her account for six months as of November. She held out hope that her money was still secure. Then she learned how much Evolve Bank & Trust, the lender where her funds were supposed to be held, was prepared to return to her.​

​

“We were informed last Monday that Evolve was only going to pay us $500 out of that $280,000,” Morris said during a court hearing last week, her voice wavering. “It’s just devastating.”​

https://www.cnbc.com/2024/11/22/synapse-bankruptcy-thousands-of-americans-see-their-savings-vanish.html

 

[Ralph Sir Edward]

Convenience.
Security.
Yield.

Pick one. . .

 

[emeryjre]

Lack of records
The house of cards collapsed
An elaborate system of theft and fraud
The creators found and utilized loopholes in the regulatory process to create the monster
Another scam
Another person loses their life savings
Regulators run and hide