The recent bankruptcy of fintech middleman Synapse has left an $85 million shortfall between what partner banks are holding and what depositors are owed. Trustee Jelena McWilliams reported that customers of fintech firms with balances totaling $265 million only had $180 million associated with their accounts in banks. This discrepancy has led to over 100,000 customers being locked out of their savings accounts for nearly a month.
Since being appointed trustee, McWilliams has worked with four banks to reconcile their ledgers in order to allow customers access to their funds. However, much is still unknown about the missing funds and how they were potentially moved or commingled among Partner Banks, including the impact of Synapse’s brokerage and lending business on fund flows. The task has been made even harder without funds to pay external forensics firms or former Synapse employees for assistance.
McWilliams presented several options to Judge Martin Barash to address the issue, including paying some customers out fully while delaying payments to others, or spreading the shortfall evenly among all customers to make limited funds available sooner. She recommended that all FBO customers receive partial payments to alleviate the effects of being locked out of their funds, but Judge Barash expressed uncertainty about what actions the bankruptcy court could take given that the depositors’ funds were not part of the Synapse estate.
The situation has been described as a crisis, with customers anxiously waiting for a resolution. While efforts are being made to reconcile the accounts and provide partial payments to some customers, the uncertainty surrounding the missing funds and the lack of resources available to the trustee have made it a challenging process. McWilliams’ ongoing work to untangle the complex web of financial transactions and provide some relief to affected customers continues as the bankruptcy proceedings unfold.
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