How Synapse worked: partner banks, pooled accounts and fintech clients

analysisIn the CFPB's description, Synapse's technology was a bridge between non-bank fintech platforms and the banks that held consumers' money, issued debit cards and processed ACH and wire transfers: its software passed end users' requests to the banks, and Synapse was responsible for tracking where consumers' funds moved and for matching its records to the banks'. These are allegations of the CFPB's 2025 complaint; the trustee and the debtor neither admitted nor denied them in the stipulated judgment, but agreed that the facts alleged would be taken as true in any proceeding based on it. ^{1 2 3}

analysisFINRA found, in a settlement order to which the respondent consented without admitting or denying the allegations, whose findings bind no other respondent and which names the banks only as DDA Bank 1 and DDA Bank 2, that end users signed account agreements with one of two deposit banks, that funds at the first bank were held before December 2023 in omnibus FBO accounts in the bank's name, and that the banks kept ledgers only at the omnibus level and relied on Synapse's ledger for individual balances; by September 2023 fintechs with millions of end users had more than $2 billion at the two banks. The trustee defined an FBO account as a pooled custodial account and reported that Synapse often used different banks for deposits and withdrawals of the same fintech, which made reconciliation both essential and difficult. ^{4 5}

analysisA 2018 master services agreement with a platform client, filed with the SEC and signed by Pathak as founder and chief executive, shows the model in contract form: bank services were provided directly by Evolve Bank & Trust or a successor bank designated by Synapse, Synapse's APIs carried the platform's requests to the bank, and the platform's users held sub-accounts within an FBO account. ⁶

analysisAccording to the CFPB, Synapse signed a Bank Services Agreement with Evolve on or about April 18, 2017 and a Master Bank Services Agreement on or about September 23, 2022; in 2017 Evolve was its only partner bank, and until at least mid-2023 Synapse issued deposit account agreements to consumers on Evolve's behalf. A 2024 trade-press report dates the first version of a Synapse/Evolve deposit agreement to September 7, 2017. ^{1 2 3}

analysisA trade-press report citing former employees says Jeff Webb and Doug Marchant, whose $700,000 was Synapse's first investment, helped introduce it to its first two bank partners, Triumph Bank and Independent Bank; no agreement with either bank is retained. ²

analysisBy the bankruptcy, the trustee reported, most end-user money sat in omnibus FBO accounts and the rest in deposit accounts across four banks: American Bank, AMG National Trust, Evolve Bank & Trust and Lineage Bank. According to the trustee, Synapse's contracts with American Bank (2021), Evolve (2022) and Lineage (2022) include clauses stating that Synapse has no interest in end users' funds, and the trustee concluded that the money was not property of the estate; Pathak and general counsel Tracey Guerin testified that it belonged to end users, apart from Synapse's own operating money at Evolve. ¹

analysisThe banks had different roles, as the trustee reported them. Evolve provided deposit accounts to Synapse and payment processing for Synapse Brokerage. AMG accepted brokered sweep deposits from August 2023 in accounts in Synapse Brokerage's name, and from February 2024 also processed payments for four fintechs. Lineage processed ACH and wire transfers for Synapse as originating bank and told the trustee it never maintained accounts for end users or contracted with them directly. American Bank held sweep deposits and issued debit cards for five fintechs; a wind-down begun at its request left it with less than $50,000 of sweep deposits by May 17, 2024. ^{2 3}

analysisThe banks told the trustee that what they held were FBO funds for Synapse or for Synapse Brokerage and its end users; Lineage's single FBO account, designated for the benefit of Synapse Financial Technologies, held funds mostly belonging to brokerage-program end users. Over several months the brokerage moved about $650 million from Evolve to AMG and other banks. The trustee noted that Evolve was supervised by the Federal Reserve, Lineage by the FDIC and AMG and American Bank by the OCC, while Synapse itself was not directly regulated by them. ^{2 4}

analysisThe CFPB alleges that from 2023 Synapse marketed a cash management program through fintechs as a way to increase FDIC coverage by sweeping funds across banks, opened accounts with Synapse Brokerage for end users and omnibus accounts at partner banks, and from October 2023 directed participating users' funds from Evolve to the brokerage and on to other banks, while Evolve still sponsored debit cards and received ACH deposits; it alleges that Synapse was responsible for tracking every user's funds across Synapse Brokerage, AMG and the other banks, Evolve and Lineage. The trustee and the debtor neither admitted nor denied these allegations in the stipulated judgment, but agreed that the facts alleged would be taken as true in any proceeding based on it. ^{1 2}

analysisA bank-regulatory consultant quoted in the trade press in May 2024 explained that affected customers could not claim deposit insurance because their funds were pooled at Evolve or held in sweep accounts arranged through Synapse Brokerage, fintechs are not banks and are not insured by the FDIC, and no partner bank had failed. ³

analysisSynapse's principal fintech partners were named as Copper, Juno, Mercury, Yieldstreet and Yotta in a letter from Senators Sherrod Brown, Ron Wyden, Tammy Baldwin and John Fetterman, announced by the Senate Banking Committee majority on July 1, 2024, which also went to former chief executive Pathak, the investors Andreessen Horowitz, Core Innovation Capital and Trinity Ventures, and the four banks. The trustee met these and other fintechs, including Changed, Gig Wage, Grabr, Gravy, IDT, Latitud, Sunny Day Fund and TClub. ^{1 2}

analysisCopper, a teen banking app operated by NEXT Financial Inc. of Seattle, described SynapseFi as its backend software provider and, with Evolve, its bank partner; Evolve issued Copper's debit cards. In May 2024 Copper abruptly closed its deposit accounts and debit cards; on May 12 its chief executive told customers that the banking middleware service it used was sunsetting imminently, and Copper later said it was coordinating with AMG and Synapse to return customers' money, while some customers could not yet access their funds. Dave Inc., another fintech, reported that the bankruptcy affected customers of fintechs using Synapse and that Dave itself was not directly affected. ^{3 4 5}