Judge Appoints Trustee in Synapse Bankruptcy Mess

[Passages]

An independent monitor is tasked with helping over 200,000 fintech customers get access to their money. But huge funding discrepancies remain.


BY DAVID DAYEN MAY 24, 2024

A federal bankruptcy judge appointed an independent Chapter 11 trustee to failed fintech middleman Synapse on Friday, as more than 200,000 customers still await access to their money.

The company had planned “to terminate all employees by close of business today,” according to one of its attorneys who participated in a Zoom-only hearing on Friday. Synapse has drained all of its assets and even before today was operating with a skeleton crew. “All our funds are gone, Your Honor,” said one of its attorneys. Meanwhile, CEO Sankaet Pathak called into the bankruptcy hearing from Santorini island in Greece, and the general counsel Tracey Guerin was in Rome.

Synapse’s chaotic bankruptcy, and particularly the collapse of a deal to buy its assets out of the Chapter 11 process, has led to customers of fintech companies who worked with Synapse being locked out of their bank-like accounts for nearly two weeks. The Chapter 11 trustee, who will take over daily management from the CEO and top officers, would have the primary goal of untangling the disputes Synapse has with its bank sponsors and get people back their money.

SNIP
UPDATE: Jelena McWilliams, the Trump-era FDIC chair, has been appointed the Chapter 11 trustee in this case. During her tenure on the FDIC, the agency issued a brokered deposit rule that allowed fintechs to use them, enabling larger accounts with these non-banks.
https://prospect.org/justice/2024-05-24-judge-appoints-trustee-synapse-bankruptcy/