Fintech Exposed by Synapse's Collapse
Bitcoin Futures Open Interest Hits Record $37.7B, Shiba Inu Burn Rate Skyrocketed By 3,894%
Synapse, a fintech middleware company that raised $50M over the years from a16z and other VCs, has collapsed.
The company laid off 40% of its staff in 2023 and in April 2024, filed for Chapter 11 bankruptcy. Synapse is now close to Chapter 7 liquidation.
They blamed the business struggles on Mercury's decision to go directly through the Evolve bank instead of using middleware.
This has severely burned popular fintech startups due to their interdependence.
Copper discontinued debit cards and banking deposit accounts, though the landing page doesn't reflect that. Juno users were blocked access to their funds. Mainvest was forced to start shutting down.
Yotta has 85k accounts locked that collectively hold ~$112M. Coffeezilla’s video also exposed their transition from savings lottery into a full blown casino. In interviews, people affected shared their locked amounts - some had up to the top shelf of 5 figures.
Funds are frozen and payments are stopped because Synapse was an "adapter" between Evolve bank that so many fintechs depend on. The fintechs are FDIC-insured, but that insurance only applies when a bank collapses, but Synapse isn’t a bank.
Fintech expert Jason Mikula estimates that as many as 100 fintechs and 10 million customers could be hurt. He noted the interdependence within the fintech sector, especially among those using BaaS as their model.
Others suggest that early Silicon Valley founders aimed to disrupt banking without fully understanding it. They called for clearer language from the FDIC regarding insurance and processes for neobanks and related services.
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