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

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Posted on 11/25/2024 1:46:17 AM PST by EBH

For 15 years, former Texas schoolteacher 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.”

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Synapse helped fintech startups like Yotta and Juno, which are not banks, offer checking accounts and debit cards by hooking them up with small lenders like Evolve.

But what is now clear is that regular Americans like Morris are bearing the brunt of that shortfall and will receive little or nothing from savings accounts that they believed were backed by the full faith and credit of the U.S. government.

The losses demonstrate the risks of a system where customers didn’t have direct relationships with banks, instead relying on startups to keep track of their funds, who offloaded that responsibility onto middlemen like Synapse.

(Excerpt) Read more at cnbc.com ...

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And people wonder why I won't use a 'digital' bank? Sure a brick/mortar can fail just as easily, but double checking and triple checking the FDIC coverage is real. And that one is working with an actual bank.

1 posted on 11/25/2024 1:46:17 AM PST by EBH

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