CNBC spoke to a dozen customers caught in the Synapse fintech predicament, people who are owed sums ranging from $7,000 to well over $200,000.
when a bank is described as a “savings startup”, you should run the other way screaming
Exactly. The combination of “bank” and “startup” is innately terrifying. Don’t put more money than you can afford to lose in a place like that.
(Aren’t there any laws in the US regarding who can call themselves a bank? Or is this another case of Americans being unwilling to do something sane and obvious because some politician has convinced them it will infringe on their “freedom”?)
Yes and no. Banks are strictly regulated. But that’s why companies like Paypal continually remind people that they are not a bank, so they can escape that regulation.
The mystery of where those funds are hasn’t been solved, despite six months of court-mediated efforts between the four banks involved. That’s mostly because the estate of Andreessen Horowitz-backed Synapse doesn’t have the money to hire an outside firm to perform a full reconciliation of its ledgers, according to Jelena McWilliams, the bankruptcy trustee.
So you’re telling me that a company which manages $42 billion worth of assets doesn’t have the money to hire a firm to track down where all of the money was transferred to? https://en.wikipedia.org/wiki/Andreessen_Horowitz
what surprised me about this, is, with as much money that’s at stake, how the hat couldn’t have been passed around to the stakeholders, to fund, then get the court to order an accounting using the plaintiffs forensic accountants. something about that doesn’t make any sense to me at all.
People relied on accounts powered by Synapse for everyday expenses like buying groceries and paying rent, or for saving for major life events like home purchases or surgeries.
Gotta love US healthcare
I’d be broke a long time ago if I lived the US. Good thing I’m French and a surgery for a life threatening condition, plus 4 month of rehabilitation, costed me a whopping 0€.
America dumb.
I wouldn’t call them dumb. Masochist, maybe, but not dumb.
We’re not masochists, we’re just ruled by sadists.
That’s some kind of communist talk. In the Land of the Free you are your own man. No nanny state telling you what to do. You have options. You can be rich, you can put all your money into a scam bank, which is de facto sanctioned, (and die when they do a rug pull because you no longer have money for life saving, much less preventative care), or you can die. But this was your choice, and you can have a huge truck (N.B. the bank actually owns the truck, but in 5 years you’ll have it paid off).
🇺🇲🇺🇲🇺🇲
In reality I left the US years ago and don’t miss it, I do fear for friends though.
It’s a nice day for Americans with savings to use the FDIC’s bank finder tool to double-check whether their savings are in an FDIC-insured situation.
American credit unions are not insured by the FDIC and won’t appear there. They are insured by the NCUA.
Or, alternative idea…
MAGACOIN GET YOUR MAGACOIN HERE
They can’t steal my money if its on hard drives buried in a dump.
I’m not from the US so unfamiliar with any of this, but having followed the link to the Yotta website from the article, it is a… gambling site? What leap is missing that people would entrust their savings to gambling?
Might as well be a gambling site: It was a startup bank with no Federal backing (FDIC) that appears to have promised greater returns than traditional banks by investing your money and giving you some of the profits back from dividends.
Still, it was a startup that wasn’t fully vested nor backed federally to secure people’s deposits. Sad.
The lie was WORSE than that.
A lot of the fintechs invovled actually told people their money was safe, because it was subject to “passthrough FDIC insurance”, because their money was ultimately put in an insured bank, and thus was safe.
Problem is that’s not how it actually worked, so basically everyone was straight up lied to.
Basically the whole thing is that the bank keeps track of who owns which account and how much money they have, so if they go bust, you just have the FDIC come in and use that data and write checks, basically.
Except since they’re disrupting banking, they also decided to just fucking not bother, and so even if there was going to be a payout, nobody has any fucking clue who has how much and in which bank said money was.
Absolute clusterfuck, and about what you’d expect from silly-con valley types.
“Hand us your money and us MBAs promise it’ll eventually get somewhere safe” is not reassuring even before the lie.
MBAs? Oh my goodness no.
It was a couple of venture capitalists!
The government should mandate warning labels on companies like that, maybe “fintech” would be a good word to force them to use, similar to the way large companies have to use the “enterprise” warning label and games companies have to be labelled “triple A” to know their products and services are low quality and have a high risk of failure.
Do you not have banking licenses (someone mentioned FDIC)? Over here, that’s how you tell real [regulated and insured] banks from pretend banks.
The “what is a bank” question is complicated, so “fintechs” have been operating in areas that are in some gray areas in between “definitely a bank” versus “definitely not a bank.”
At the most informal, you’ve got things like a roommate who collects everyone’s fair share of rent before sending one payment to the landlord, or a parent who keeps track of their kids’ virtual balances of what the kids are allowed to spend. These definitely aren’t banks.
Then you’ve got things like short term balances between people who deal with each other: an employer who keeps track of hours and pays the employee at the end of the pay period, a retail customer who has some store credit from a returned item, a contractor who periodically invoices a customer for work performed, etc. Despite the “credit” and “balances,” these aren’t bank accounts.
Some gray areas get a little bit more complicated. You have airline mileage and hotel point programs where the miles/points can be used to purchase goods and services, including sometimes those not even being offered by the business where the miles were accumulated.
Then you get into banking-like structures that might be, or might not be banks. Is it banking when you buy something on a periodic payment plan? What about when you put down a deposit to reserve a preorder for something you expect to buy when that product is released? Or give someone a gift card for a specific store? Does it matter if these programs are administered by third parties separate from the buyer or seller?
Even things like Apple Cash or PayPal or Venmo or CashApp perform functions that can be bank-like, or not really bank-like.
Fintechs have looked at the constantly updated rules of what they can or can’t do before needing to comply with certain banking regulations, and usually try to avoid accidentally triggering certain rules. And the rules don’t divide into just bank versus not bank, as many of the rules apply to non-banks that do certain things, and many of the rules don’t apply to even banks that stay out of certain product lines. So it’s not a binary yes or no, but a series of complicated areas where some are yes and some are no.
The big problem, where this Synapse bankruptcy is hurting people, is when people worked with an entity that provides certain services, who relied on the back end on a middleman that provides other services, and then the middleman fails. People operating in the gray areas are exposing themselves to systemic risks they might not fully understand.
Isn’t that what they signed up for when they put their money in a nonFDIC insured account?
Read the article, and maybe don’t be such a heartless bastard?
Several people CNBC interviewed said signing up seemed like a good bet since Yotta and other fintechs advertised that deposits were FDIC-insured through Evolve.
“We were assured that this was just a savings account,” Morris said during last week’s hearing. “We are not risk-takers, we’re not gamblers.”
I realize that my comment does sound really harsh. And there definitely should be criminal penalties for falsely advertising that they were an FDIC covered institution and a best effort to return the funds
But (again I am being harsh again) there is risk in putting your money in a faceless app instead of a brick and mortar institution and there needs to be some personal accountability for making bad decisions
What do you say to those who use Wells Fargo (brick and mortar institution) and and screw you over by opening accounts on your behalf?
I’ve been using Ally (an online bank) for decades. They told me that they are FDIC insured (and they are), but I would never thought to go to FDIC gov website to double check their words. I bet most Americans don’t do that. It is not a reasonable expectation.
I don’t think these folks were making bad decisions. These folks were lied to and were robbed.
This is not the same.
They changed to a cash sweep / brokerage model (not FDIC-insured at the individual account holder level) like 6 months before the bankruptcy. End users had to click a consent checkbox or the like and probably thought nothing of it.
That changes everything. That’s dirty pool, shouldn’t have been allowed by SEC/Fed or who ever their regulator was
Risky investment turns out to be risky. No one could have seen that coming.
