Inside the Collapse of Synapse: Missing Funds Were Known to Investors, Banks for Years

Millions of consumers who kept their savings with digital banking startups such as Yotta or Juno have lost access to their money as a result of this month’s collapse of a little-known fintech called Synapse Financial Technologies. Synapse, which supplies some of the basic plumbing that allows startups to offer banking services, filed for bankruptcy protection in early May amid accusations from numerous onetime fintech clients and banks that tens of millions of dollars are unaccounted for.

As Synapse’s problems have spilled out into public view in recent weeks, a key issue has risen to the surface: the company’s records on how much money was in the customer accounts of its fintech clients differed from what its banking and fintech partners’ records showed. And it turns out that’s not a new issue. For at least two years, Synapse’s business partners and its board, which includes partners of its venture backers such as Andreessen Horowitz, were aware of such discrepancies, according to seven former employees.