Evolve and Synapse: from partnership to the May 2024 freeze

analysisSynapse Financial Technologies, a Delaware company based in Woodland Hills, California, founded and run by Sankaet Pathak, provided technology and other services to fintech platforms and partner banks. According to the CFPB's 2025 complaint, Evolve was one of its partner banks: they signed a Bank Services Agreement around April 18, 2017 and a Master Bank Services Agreement around September 23, 2022, and until at least summer 2023 Synapse gave consumers who opened accounts through fintech platforms a deposit account agreement on Evolve's behalf. ^{1 2}

analysisFINRA's August 2025 complaint against two former officers of Synapse's brokerage describes the structure without naming the bank, calling it 'DDA Bank 1'; a fintech industry newsletter identified it as apparently Evolve, and the account matches the CFPB complaint, which names Evolve. End users who opened accounts through fintechs deposited money with the bank, where before December 2023 it sat in omnibus accounts in the bank's name for their benefit; the bank kept ledgers only at the omnibus level and relied on Synapse for individual balances. Its services agreement with Synapse expired in September 2023, with a wind-down to May 2024. These are FINRA's allegations against the two officers, not findings about the bank. ^{3 4}

analysisAccording to FINRA's complaint, the two sets of ledgers differed substantially from about 2022, with Synapse's showing more end-user money at the bank than the bank said it held. Press reports cited by four senators say Evolve told Synapse in August 2022 that it intended to end the relationship, and a fintech industry newsletter reported a 2022 e-mail by the bank's Open Banking controller saying balances tended 'to differ a couple hundred million on the daily'; that e-mail was not retained, and both accounts come from press reports and e-mails disclosed in litigation. The CFPB's complaint against Synapse, to which Evolve is not a party, states that by September 2023 at the latest both companies knew of a deficit of tens of millions of dollars in the funds Evolve held for end users and publicly blamed each other; the deficit's cause remains disputed. Synapse filed for bankruptcy in April 2024, and the dispute was still unresolved when the CFPB sued Synapse in August 2025. ^{1 2 3 4}

analysisA business magazine, citing bankruptcy-court records, reported that in September 2023 Synapse told Evolve an internal review had found discrepancies of about $13 million and alleged that the bank had paid itself fees from customer funds, some of which it was not entitled to. On September 25, 2023 Evolve notified Synapse that it was in breach of contract and withheld monthly payments of more than $40 million; two days later Pathak accused the bank of 'persistent negligence' and 'misappropriation of consumer funds', while acknowledging that Synapse may have 'incorrectly received' $3.25 million. An Evolve spokesperson said any accounting errors were Synapse's responsibility and that the bank had given Synapse detailed information on every fee, which Synapse as programme manager was to allocate. According to a business magazine, Synapse committed to pay a little over half of the $3.25 million and Evolve agreed in October to cover the rest. An online encyclopedia, citing a business magazine, says Synapse's board considered replacing Pathak in 2023 over ledger complaints, a secondary account of board deliberations for which no board record was retained. ^{5 6}

analysisThe same September, according to a business magazine's account, Synapse learned that Mercury, then about 35% of its business by Pathak's account, would move more than $3 billion of deposits to work directly with Evolve; FINRA describes Synapse's biggest customer, with about $3 billion at the bank, partnering directly with it around October 2023, and Synapse contending that the bank migrated about $49 million more than it was entitled to. When Synapse stopped operating in May 2024, its records showed about $92 million more in end-user deposits at the bank than the bank said it held. ^{5 1}

analysisSynapse Brokerage LLC, a FINRA member since 2006 that Synapse acquired in July 2020, launched a cash-management programme in September 2023 as part of Synapse's move away from the bank. Customers' money went first to a deposit bank and was then to be swept to other programme banks, while Synapse kept the ledger. FINRA alleges that after a large fintech notified its users on October 5, 2023, about $200 million of some 650,000 users moved from the bank to the programme in eight days; California's regulator says Yotta agreed to move its savings accounts to Synapse Brokerage around October 11, 2023, while its customers kept Evolve routing and account numbers. The CFPB alleges in its complaint against Synapse that Evolve was not one of the banks holding brokerage deposits but kept sponsoring debit cards and receiving direct deposits for users who moved. ^{1 2 3 4}

analysisFINRA further alleges that around December 31, 2023 the bank stopped sweeping brokerage customers' incoming funds into the programme and held them in omnibus accounts in Synapse's name, without telling customers, and that Synapse then 'reallocated' funds between the bank and the programme banks by changing ledger entries without moving money, including $85 million of one fintech's funds, according to a fintech newsletter's reading of the complaint. ^{1 3}

analysisSynapse filed for Chapter 11 on April 22, 2024 and sought approval of a sale; the CFPB's complaint says the buyer required Synapse and Evolve to settle their dispute and ensure that balances at Evolve were fully funded, which they could not do. On May 11, 2024, according to the CFPB, Synapse cut off the bank's access to the dashboard of end users' balances and stopped the daily ledger reports, and Evolve stopped processing transactions and froze all activity for every end user. FINRA says funds at the programme banks were returned in May and June 2024 while those at the bank remained inaccessible; the bank began releasing funds in November 2024, and customers whose funds were allocated to it recovered only a fraction. These are allegations in the CFPB and FINRA complaints; an online encyclopedia describes the freeze as lasting five months and locking tens of thousands of customers out of their accounts. ^{1 2 3}

analysisThe dispute did not end with the bankruptcy. An online encyclopedia records that in September 2024 Synapse accused Evolve of misappropriating customer funds, an accusation no court has ruled on; Evolve told the bankruptcy court its reconciliation showed Synapse's ledgers were wrong and rejected the former chief executive's claim that the missing funds are at Evolve. ^{3 4}