Synapse bank collapse resulted in the disappearance of nearly $109 million in deposits held by Yotta's customers, according to the bank.

• Nearly all the deposits held for Yotta banking app customers went missing weeks ago, according to one of the lenders involved, as evidenced by the failed fintech middleman Synapse's ledgers.
• As of April 11, Evolve Bank & Trust reported that a network of eight banks held $109 million in deposits for Yotta customers, according to a bankruptcy court letter filed late Thursday.
• One month after the initial deposit, the ledger revealed that only $1.4 million in Yotta funds remained at Evolve Bank.
• In a letter sent on Thursday, bankruptcy trustee Jelena McWilliams requested increased involvement from five U.S. regulators in the Synapse collapse.

Nearly all the deposits held for Yotta banking app customers went missing weeks ago, according to one of the lenders involved, as evidenced by the failed fintech middleman Synapse's ledgers.

As of April 11, Evolve Bank & Trust reported that a network of eight banks held $109 million in deposits for Yotta customers, according to a bankruptcy court letter filed late Thursday.

One month after the initial deposit, the ledger revealed that only $1.4 million in Yotta funds remained at one of the banks, according to Evolve. The company stated that neither customers nor Evolve received any funds during that time period.

"The bank stated that the irregularities in Synapse's ledgering of Yotta end user funds are just one of the many discrepancies that Evolve has observed. A thorough investigation into what happened to these funds or why the Synapse-provided ledger reflected money movement that did not actually occur must be conducted."

Since May 11, over 100,000 fintech customers have been unable to access their bank accounts due to a deepening predicament. Evolve, one of the key players involved, has been working with other banks to determine who is owed what. However, its former partner Synapse, which connected customer-facing fintech apps to FDIC-backed banks, filed for bankruptcy in April amid disputes over customer balances.

Last week, the Federal Reserve reprimanded Evolve for improperly managing its fintech partnerships. The regulator noted that Evolve engaged in unsafe and unsound banking practices and forced the bank to improve oversight of its fintech program. The Fed said the enforcement action was separate from the Synapse bankruptcy.

Since late 2022, Synapse has been trying to separate itself from Evolve due to ledger problems it has discovered, according to a spokesman for the Memphis, Tennessee-based bank.

Yotta declined to comment.

Unclear timeline

Although banks are under increasing pressure to release the locked accounts, the disorganized records and limited funds for an external forensic examination are causing uncertainty about when this will occur.

Evolve is reluctant to process payments to many customers due to inconsistencies in the ledgers, particularly with regards to the Synapse brokerage program and the banks involved.

In late 2023, Synapse transferred the majority of its fintech customers' funds held at Evolve to a group of banks associated with its brokerage program, as stated in court filings by Evolve.

Jelena McWilliams, the court-appointed trustee and former FDIC Chairman, stated that achieving a "full reconciliation to the last dollar with the Synapse ledger" may not be feasible.

The total shortfall in funds owed to all impacted depositors is still unknown. Earlier this month, McWilliams estimated the amount at $85 million; however, in subsequent reports, the range was between $65 million and $96 million.

Pleading with regulators

The disruption to thousands of fintech customers has persisted for six weeks. Many Yotta customers, as reported by CNBC, relied on the service as their primary checking account and have been significantly impacted by the situation.

McWilliams, in a letter sent Thursday, requested that five U.S. regulators increase their involvement in the Synapse collapse by providing resources to assist customers in understanding the location of their funds and facilitating communication with banks.

"The bankruptcy of Synapse has had a devastating impact on end-users, with many unable to pay for basic living expenses and food. McWilliams wrote to regulators, requesting prompt attention and quick action."

On Friday, at 1 p.m. E.T., McWilliams will present her latest status report in the bankruptcy case during a hearing.