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The fintech business world is in shambles after the collapse of a major player that left thousands of common investors high and dry, with their life savings evaporated and dreams shattered. The fintech intermediary Synapse recently filed for bankruptcy, leaving over 100,000 Americans out of $90 million and triggering a massive class action lawsuit.
Among the many victims of this financial catastrophe is Kayla Morris, a former teacher from Texas who had been diligently saving money to buy a larger home for her growing family. She and her husband transferred over $280,000 into the fintech app Yotta, believing it to be a safe investment. However, after the Synapse bankruptcy, they were shocked to find out that they would only be receiving a mere $500 back from Evolve Bank & Trust, the financial institution handling the repayments.
The stories of Morris and others like Zach Jacobs, who had over $94,000 in Yotta and was only getting back less than $130, are just a few examples of the widespread devastation caused by the collapse of Synapse. Many of the victims had never even heard of the company before May 11, when news of its bankruptcy broke.
Synapse was founded in 2014 with funding from Andreessen Horowitz, with the goal of providing banking services to fintech companies like Yotta and Juno without the need for banking licenses. However, as a result of their bankruptcy, a staggering $265 million in customer funds has been tied up, with $90 million still unaccounted for.
The main issue arising from the collapse of Synapse is the complex problem of ledger keeping. With the company going under, it has become unclear how to distribute the remaining funds to customers. The lack of transparency and accountability in how the funds are being managed has left many in financial limbo, unsure if they will ever see their money again.
The situation has raised concerns about the overall stability and reliability of the fintech industry, as well as the need for stronger regulations to protect consumers. The Federal Deposit Insurance Corporation does not cover fintech platforms without banking licenses, leaving customers vulnerable in the event of a financial collapse.
In response to the chaos caused by the Synapse bankruptcy, the FDIC has proposed new rules requiring stricter ledger keeping for bank deposits received from fintech companies. This is aimed at ensuring that customer funds are properly managed and protected, in order to prevent similar disasters in the future.
As the fallout from the Synapse collapse continues to reverberate throughout the fintech industry, victims like Kayla Morris and Zach Jacobs are left grappling with the harsh reality of losing their hard-earned money. The failure of Synapse serves as a stark reminder of the risks involved in the world of fintech investing, and the need for greater transparency and accountability in order to prevent such devastating losses from occurring again.
