Regulatory actions involving Synapse and its partner banks

analysisIn a consent order in Case No. 16-041, filed in June 2020, the New Hampshire Banking Department contended that SynapseFi, formerly Synapse Payments LLC, had carried out 1,187 unlicensed money transmissions for New Hampshire entities from at least 2015 to 2017, collecting $82.60 in fees, and noted that the company had cooperated fully and stopped in 2017. Waiving a hearing, the company agreed by consent to continue refraining from unlicensed transmission, to amend its third-party contracts so that it was not positioned to transmit money and to pay a fine of $1,582.60; Sankaet Pathak signed as chief executive. ^{1 2}

analysisOn September 26, 2022 Connecticut's Banking Commissioner, Jorge L. Perez, notified Synapse Credit LLC that he intended to refuse to renew its small loan licence and of its right to a hearing: its renewal application of December 30, 2021 was pending because it had filed only unaudited statements instead of audited statements for 2020 and 2021, had not answered a compliance letter of May 5, 2022 and had not surrendered the licence. The notice went to Michael Rasic as chief financial officer and chief business officer. No later decision on the renewal is in the record. ³

analysisOn January 30, 2024 the FDIC issued a consent order against Lineage Bank of Franklin, Tennessee (FDIC-23-0041b); the bank consented without admitting or denying charges of unsafe or unsound practices in its third-party risk management program and its fintech partnerships. Its board must receive monthly reports on fintech partners' FBO-account and ACH activity and the effect on capital and liquidity, formalise due diligence before accepting new fintech partners and commission an independent look-back, from September 1, 2022, at all activity in the account of its largest fintech partnership to identify suspicious activity. The order names neither the fintech partners nor that partnership. ¹

analysisOn June 11, 2024 the Federal Reserve Board and the Arkansas State Bank Department issued a cease-and-desist order, by consent, against Evolve Bancorp, Inc. and Evolve Bank & Trust (Docket Nos. 24-012-B-HC and 24-012-B-SM). It recites examinations of August 2023 and January 2024 that found deficiencies in risk management and consumer compliance at the bank's Open Banking Division, which served fintech partners, and in anti-money-laundering and sanctions compliance. The bank must ensure that its own and its fintech partners' ledger and sub-ledger responsibilities are clearly defined, including in a business disruption; may not add fintech partners, products or programs to the division without prior supervisory approval; and must give supervisors an analysis of the liquidity impact before exiting a fintech relationship. The bank consented without a formal proceeding or adjudication of any issue of fact or law, and the Federal Reserve said the action was separate from the Synapse bankruptcy. ^{2 3}

analysisOn August 21, 2025 the CFPB filed an adversary complaint against Synapse within its bankruptcy case (Adv. No. 1:25-ap-01052-MB), together with a proposed stipulated final judgment. Its single count alleged that Synapse, as a service provider to the fintech platforms and to Evolve, engaged in unfair acts or practices under sections 1031 and 1036 of the Consumer Financial Protection Act by failing to keep adequate records of where consumers' funds were and to ensure that those records matched the partner banks' records, so that consumers lost access to their money. The trustee and the debtor neither admitted nor denied the allegations, and the CFPB made none against the trustee. Judge Barash entered the stipulated final judgment on September 12, 2025, without adjudication of any issue of fact or law; the facts alleged are to be taken as true in any proceeding based on it. The judgment permanently bars Synapse from taking part in or assisting deposit-taking, money transmission, custody of funds or payment processing, bars the debtor and the trustee from selling customer information, and imposes a civil money penalty of $1, allowed as a general unsecured claim, which the CFPB said let it use its Civil Penalty Fund to compensate harmed consumers; the CFPB then allocated money from the fund to affected consumers. ^{1 2 3 4}

analysisThe judgment defines the harm of each affected consumer, anyone with an account at a fintech platform served by Synapse on May 17, 2024, as the difference between that day's balance with the platform and the distributions since paid by Evolve, AMG National Trust or Lineage, plus prejudgment interest. The Civil Penalty Fund allocated $46,248,291 for Synapse victims on November 28, 2025 and a further $8,965,767 on May 29, 2026; Yotta reported that the timing and amounts of the CFPB's payments remained to be determined. ^{3 4 5}

analysisOn September 17, 2024 the FDIC proposed a rule that would set heightened reconciliation and recordkeeping standards for certain custodial accounts holding commingled customer funds, citing, according to another fintech's annual report, recordkeeping issues connected with Synapse's commingling of customer funds in custodial accounts. ¹

analysisFurther actions concern Synapse's subsidiaries and Yotta: California's DFPI revoked Synapse Credit's lending licence in July 2024 and Synapse Brokerage's broker-dealer certificate in January 2025; FINRA expelled the brokerage in June 2025 and in 2026 settled its disciplinary case against two former officers, Mark Paverman and Jeffrey Stanley; and in May 2026 Yotta stipulated to a DFPI consent order to desist and refrain from deceptive acts or practices under the California Consumer Financial Protection Law, including representing that cash deposits in Yotta accounts were protected against all risks, and agreed to a $1,000,000 penalty. ^{2 3 4 5 6 7 8 9}