Synapse and Evolve Bank & Trust: from partnership to dispute

analysisSynapse and Evolve began working together around 2017. A 2025 business-press report says Pathak built the relationship partly through a rapport with Evolve's chairman, Scot Lenoir; both attended the University of Memphis, Lenoir three decades earlier. The bank that FINRA calls DDA Bank 1 in its 2026 settlement order matches Evolve on every documented point, and the second bank, partnered from 2022 until March 2024, matches Lineage Bank; that identification is a comparison of particulars, not a statement by FINRA. ^{1 2}

analysisEvolve's spokespeople say the bank planned to leave well before the collapse: in 2025 a spokesperson said Evolve had a long-standing plan to deal directly with fintechs rather than through aggregators like Synapse and had told Synapse a year in advance, and in June 2024 a spokesman said the bank had been trying to separate itself since late 2022 because of ledger problems. Pathak said he had heard that Evolve wanted to win Synapse's customers directly to cut out Synapse's fees. No notice of exit or 2022 correspondence is retained. ^{1 2}

analysisIn a statement of July 12, 2024 Evolve said its services agreement had expired by its terms in September 2023 and was being wound down when Synapse filed for bankruptcy; fintechs had to find another provider, some moving in the autumn of 2023 to a program run by Synapse Brokerage, to which Evolve transferred balances at Synapse's instruction while temporarily processing payments for its end users. That is Evolve's own public account. FINRA likewise found, in findings of its Paverman settlement order that were consented to without admitting or denying the allegations, bind no other respondent and refer to the bank only as DDA Bank 1, that the first deposit bank's agreement expired in September 2023, with some services continuing during a wind-down until May 2024. ^{3 4}

analysisOn its update page Evolve, a party to the dispute, adds that Synapse created Synapse Brokerage under a revised cash management program begun in the fall of 2023 and hastily migrated funds away from Evolve to AMG, Lineage and American Bank, which it calls the Synapse ecosystem banks. Pathak gives a different reason for the move: Synapse launched the brokerage sweep program around September or October 2023 because Evolve had raised its reserve requirement and withheld interest, and he says Evolve stopped processing sweeps to AMG without explanation. The interviewer noted that Synapse Brokerage had been set up earlier and that programs had been migrating to it since significantly earlier in 2023. ^{5 6}

analysisAccording to Synapse's May 2024 court filing, Pathak told Lenoir in a call around September 15, 2023 that Synapse had found improper debits by Evolve since 2017 exceeding $27 million from depositor funds in Evolve's FBO accounts. A 2025 business-press report describes Synapse's September 2023 notice as reporting discrepancies of about $13 million in accounts holding customer funds at Evolve and alleging that Evolve paid itself fees from customer funds, including some it was not entitled to. Evolve disputes Synapse's account, and the two figures are not reconciled in the record. Evolve's spokesperson said any accounting errors were Synapse's responsibility, because the bank had given Synapse details of every fee charged, which Synapse, as program manager, was supposed to allocate to platforms and end users. ^{1 2}

analysisOn September 25, 2023 Evolve sent Synapse a notice of material breach and raised its required reserve; the notice itself is not retained. Synapse's filing says the notice cited a failure to fully fund Evolve's FBO accounts, demanded a $50 million reserve and said Evolve would withhold all remaining compensation due to Synapse, which ultimately exceeded $43 million. Two days later Pathak sent Evolve a seven-page letter, seen by the business press, accusing it of persistent negligence through a misappropriation of consumer funds and demanding an independent investigation; the same letter acknowledged that Synapse might have incorrectly received $3.25 million from customer accounts, of which it would pay a little more than half, with Evolve agreeing in an October 2023 contract to cover the rest. Neither document is retained. Synapse's April 2024 asset purchase agreement refers to a letter agreement with Evolve dated October 1, 2023; the record does not show whether it is the contract the press describes. Pathak also said in a November 2024 interview that Evolve was aware of and acknowledged that fees owed to TabaPay had been improperly debited from customer funds, while disputing whether that was the bank's fault; no Evolve statement on this is retained. He denies that Synapse knowingly let fees it owed be debited from end-user funds, saying it alerted Evolve and worked to fix such issues as they came to its attention. ^{3 1 2 4 5}

analysisThe CFPB alleges that both Evolve and Synapse knew by September 2023 at the latest of a deficit of tens of millions of dollars in the funds Evolve held for end users, and that the dispute was still unresolved in August 2025; the trustee and the debtor neither admitted nor denied the complaint's allegations in the stipulated judgment, but agreed that they would be taken as true in any proceeding based on it. FINRA found, in its Paverman settlement order, whose findings were consented to without admitting or denying the allegations, bind no other respondent and name the bank only as DDA Bank 1, that from around 2022 the first bank's ledger and Synapse's diverged, that by September 2023 each side said the other's ledger was wrong, and that by May 2024 Synapse's records showed about $92 million more at the bank than the bank acknowledged. ^{6 7 8}

analysisIn May 2024 Synapse told the bankruptcy court that Evolve owed depositors $150,437,659.89 as of May 14 but held $102,694,725.72 in 49 FBO accounts, and had to fund the difference, the "FBO Account Deficit"; it said Evolve had moved Synapse's reserve of more than $43 million partly to cover a shortfall of at least $35.3 million and still owed about $50 million. Synapse's schedule attributed most of the total to Yotta's end users ($111,743,905.77) and Juno's ($26,508,736.54). Evolve says these figures rest on inaccurate ledgers prepared by Synapse and that the funds were never in its possession. ^{1 2}

analysisWhen it filed for bankruptcy Synapse said Evolve had agreed to pay $2 million to the estate, and court approval of that settlement was a condition of the TabaPay sale. On May 9, 2024 Synapse reported that the settlement had not been consummated because of disputes over Evolve funding it, and the buyer said it would not proceed with the sale without it. In Synapse's account, given in a court filing that Evolve disputes, Evolve had agreed to fully fund its FBO accounts by April 22, repeatedly asked for more time, and announced on the evening of May 8 that it had already fully funded a single FBO account on April 8 by transferring funds from Synapse's reserve account, paying itself almost $9 million in fees, and that nothing more was required; Synapse disputed that calculation and says TabaPay walked away when it learned of it. An Evolve spokesperson said the bank was not party to TabaPay's agreement with Synapse and had no closing conditions to meet, and that its settlement agreement had a funding condition which Evolve satisfied; TabaPay said it withdrew because the purchase agreement's closing conditions were not met. The purchase was never completed. ^{1 2 3 4 5}

analysisThe CFPB alleges that the buyer required Synapse and Evolve to agree and to fully fund the balances at Evolve, and that they could not resolve their dispute; the trustee and the debtor neither admitted nor denied this in the stipulated judgment, but agreed that it would be taken as true in any proceeding based on it. TabaPay's co-founder and president, Rodney Robinson, told the business press that all parties had been willing to cover the gap until its true extent became clear, calling it a matter of sloppy business practices that went on for years. ^{6 7 8}

analysisOn May 11, 2024, the CFPB alleges, Synapse stopped maintaining Evolve's access to its dashboard of end-user balances and stopped sending daily ledger reports; Evolve then froze all end-user activity, and Lineage did the same, so that consumers could not use cards, withdraw money or receive direct deposits. Evolve asked the court on May 13 to restore its access or let it close Synapse's accounts, saying it had been denied access to Synapse's systems and forced to freeze accounts. Synapse answered that Evolve froze all accounts in response to a temporary pause in its dashboard access and had appropriate access from at least the morning of May 13. The trustee later reported that it was undisputed at the hearing that end users had lost access to their money. The CFPB's allegations were neither admitted nor denied by the trustee and the debtor, who agreed that they would be taken as true in any proceeding based on the judgment. ^{1 2 3 4}

analysisEvolve, a party to the dispute, says the ledgers Synapse supplied contained numerous material irregularities: Synapse Brokerage balances that changed significantly from one day to the next without corresponding movement of funds, in some cases by millions of dollars, and discrepancies between the brokerage ledgers and actual movements into and out of the bank, where it said it held about $46 million in accounts created for payment processing and was never a program bank. Pathak attributes the gap to Evolve's technical problems and fee debits. As an example, Evolve told the trustee that a Synapse ledger of April 11, 2024 showed $109 million for Yotta's end users at American Bank, AMG and six program banks reached through American Deposit Management, and the ledger of May 17 only $1.4 million, with no funds sent to Evolve in between. ^{1 2 3}

analysisIn a 2025 letter to end users, Evolve, a party to the dispute, said Synapse, which was contractually responsible for monthly end-user statements, had given it statements for April and May 2024 in which many accounts moved from zero to substantial balances with no corresponding transfers in Evolve's or Federal Reserve records, and had given end users different statements that omitted transfers from Evolve to Synapse Brokerage: in one October 2023 example the statement given to Evolve showed an ending balance of $25.45 and the one given to the Yotta end user $2,862.82. The statements are reproduced only in its letter. Its consultant Ankura Consulting Group completed a reconciliation on October 18, 2024 that, according to Evolve, found Synapse's ledgers contradicted by transaction data, though Ankura could not trace funds beyond Evolve because the other banks did not take part; the reconciliation itself is not public. AMG and Lineage called Evolve's suggestion that they might still hold substantial funds irresponsible and disingenuous, and in June 2025 the trustee reported that the exact amounts and sources of the shortfall had not been clearly established. ^{4 5 6}

analysisPathak, for his part, says the shortfall comes from discrepancies between the two sides' records and Evolve's fee debits, and that Evolve should cover the deficit it created; Evolve calls his version simply not true, says only Synapse could keep accurate ledgers and that his claims rest on demonstrably inaccurate ledgers his company prepared, and, according to Pathak, sent him a cease-and-desist letter after he posted what he described as an anonymised trial balance. These are competing statements of the parties: no court or regulator has decided between them, the CFPB recorded that the dispute over the deficit was still unresolved when the sale failed, and the trustee expressed no opinion on whether any bank's liability to end users was limited to the funds it held. ^{7 8 9 10 5}