The Synapse bankruptcy: from a planned sale to dismissal

analysisSynapse said it had explored investment, restructuring and sale options from around the spring of 2022, engaging William Blair as investment banker and working with Sherwood Partners as financial adviser, and later seeking to engage Jefferies to sell the company as a going concern, which drew several offers. Its secured lenders included Silicon Valley Bank, under a February 19, 2021 loan of up to $6 million to Synapse and Synapse Credit secured on all of Synapse's personal property other than intellectual property, and lenders identified as TPVG, TPVL and TPC, with TriplePoint Capital LLC as collateral agent, under a July 29, 2022 growth capital agreement of up to $20 million in three facilities, secured on all of Synapse's personal property with control agreements over accounts at SVB, Evolve and Independent Bank and subordinated to SVB. TriplePoint Venture Growth BDC Corp. also held a warrant for 3,913 shares of Synapse's non-voting stock. ^{1 2 3}

analysisBy unanimous written consent of April 10 and 11, 2024, the board, consisting of Sankaet Pathak, Doug Marchant and Hillary Quirk, resolved to file for Chapter 11 and named Pathak the responsible officer. On April 19 Synapse signed an asset purchase agreement under which TabaPay or its designee would buy substantially all its assets, including the equity in both subsidiaries, for $9,700,000 in cash, in three stages ending in April 2025; the debtor listed about $2 million in cash, its technology platform, customer agreements, the subsidiaries and possible claims against third parties as its main assets, and a registered trademark as its only intellectual property. ^{4 1 2}

analysisSynapse filed a voluntary petition on April 22, 2024 in the U.S. Bankruptcy Court for the Central District of California (Case No. 1:24-bk-10646-MB, Judge Martin R. Barash), signed by Pathak as chief executive; an official committee of unsecured creditors was later appointed. According to a trade-press report, the petition estimated 50 to 99 creditors and assets and liabilities of $10 million to $50 million each. The largest unsecured creditors listed included Kroll Associates, Thomson Reuters (disputed), Lineage Bank (disputed) and Amazon Web Services, with TabaPay and Yotta also listed. ^{1 2 3}

analysisThe court approved bidding procedures on May 1 and held the sale hearing on May 9, 2024, where Synapse reported that it had failed to settle with Evolve and the buyer said it would not proceed without a settlement; the sale process stopped. On May 15 the U.S. Trustee moved to convert the case to Chapter 7 or appoint a trustee, saying, according to a technology-press account, that Synapse had grossly mismanaged its estate. On May 24 the debtor reported that it would run out of cash and cease operations that day, and that without new funding, which did not appear available, there was no chance of a reorganization or a going-concern sale; one of its lawyers told the court, according to a press report, that all the company's funds were gone. ^{1 2 3 4 5}

analysisGranting the U.S. Trustee's motion that day on findings stated orally, Judge Barash ordered the appointment of a Chapter 11 trustee, directed the trustee to meet the fintechs, banks and secured lenders and report weekly, and ordered the debtor, its subsidiaries, officers, directors, shareholders and current and former employees to preserve all evidence; the U.S. Trustee appointed Jelena McWilliams, a former chair of the FDIC. A 2025 business-press account describes the court as having removed management citing gross mismanagement; the oral findings are not retained. According to a press report, the judge called it a horrible situation for customers who could not buy food or pay their mortgage or rent. ^{6 7 8 1 5}

analysisThe trustee obtained access to Synapse's MongoDB database, Slack, HR system and the data room prepared for TabaPay; administrative access to MongoDB came from former officers. Master credentials to its Amazon Web Services environment, where ledger records were also stored, were reported to be known only to two former engineers, who later said they no longer had access. Her reports describe Pathak and general counsel Tracey Guerin as former officers who testified at the creditors' meeting on June 10, 2024, Pam Wismer as an independent contractor who had provided part-time chief financial officer services and Jack Doan as former chief human resources officer. Yotta reported that in early July 2024 the trustee said B. Riley Financial had been retained to help with forensic accounting and the management of the estate. ^{1 2 3 4}

analysisIn June 2024 the trustee reported that the estate appeared to have no liquidity and no arrangement with its secured lenders to use cash collateral; throughout her appointment it could not pay its own counsel or advisers. First Citizens Bank, which had acquired SVB and held Synapse's operating accounts, was owed about $1.5 million and TriplePoint about $7.2 million in June 2025, both secured and protected under the cash collateral orders. The trustee tried to sell the platform and data, but no qualified bid arrived by November 11, 2024 and the bids received did not exceed the liens; she also found no way to fund claims against third parties, although the debtor might hold valuable ones. ^{1 5 6 7}

analysisOn the trustee's motion of June 5, 2025, the court approved dismissal of the case on November 12, 2025. The clerk closed it on June 29, 2026, discharging the trustee and exonerating her bond. ¹