A US fintech company called Synapse has collapsed, leaving over 100,000 Americans without access to nearly $90 million of their own money. The company, which provided services to popular banking apps like Yotta and Juno, was found to have inadequate record-keeping practices, leaving customers unable to retrieve their funds.
One woman, Kayla Morris, lost an estimated $280,000 after her investment through Yotta was tied up in Synapse’s bankruptcy. She received only $500 back, leaving her devastated. Thousands of other investors were also left with little to no money after the collapse.
The Federal Deposit Insurance Corporation (FDIC) has proposed new record-keeping rules for banks that accept deposits from third-party entities, like fintech companies. The aim is to prevent similar incidents in the future.
However, the process of recovering the lost funds has been slow and uneven. Some investors have received as little as $0.84 on over $10,000 in funds, highlighting the need for more robust oversight and protection for customers.
The FDIC’s proposed rule requires banks to maintain direct access to records of third-party entities maintaining ledgers. The move comes after Synapse’s bankruptcy revealed inadequate record-keeping practices, leaving customers without their money.
A class-action lawsuit has been filed against several partner banks working with Synapse, alleging gross mismanagement of customer funds. The lawsuit seeks to recover the lost funds and ensure that banks are held accountable for their actions.
The collapse of Synapse serves as a reminder of the importance of robust oversight and protection for customers in the fintech industry.
Source: https://www.independent.co.uk/news/world/americas/synapse-fintech-company-collapse-bankruptcy-b2664903.html