Synapse Brokerage: the cash management program, FINRA and California

analysisFINRA's account of the program comes from findings in its January 28, 2026 order accepting Mark Paverman's offer of settlement: he consented to them without admitting or denying the allegations, the order says they are not binding on any other respondent, and it refers to Synapse's deposit banks only as DDA Bank 1 and DDA Bank 2 and to fintechs by number. According to those findings, Synapse decided, amid its dispute with its first deposit bank, to move away from that bank by having its dormant broker-dealer offer services directly to end users; Jeffrey Stanley was warned that the firm was not ready but decided to proceed. In September 2023 Synapse Brokerage launched a cash management program that spread deposits among banks that were not FINRA members, with the aim of maximising FDIC coverage. It was the firm's only line of business and offered no securities. ¹

analysisCustomers had to deposit money first at one of Synapse's deposit banks, from which it was to be swept to a Synapse Brokerage omnibus account at a third bank and spread among program banks, with Synapse keeping the ledger of each customer's balance. The brokerage earned substantial interest and fees from the program banks and passed part of them to fintechs or customers. From September 2023 to mid-May 2024 customers could not withdraw directly from the program banks; money had to move back through the deposit banks first. These are findings of the same settlement order, to which Paverman consented without admitting or denying the allegations and which bind no other respondent. ¹

analysisFINRA also found that brokerage customers' funds at the second deposit bank sat in an FBO account in Synapse Financial Technologies' name; that after December 2023 the omnibus accounts at the first bank were retitled "Synapse Financial Technologies Synapse FBO Synapse Brokerage ACH Customers" and "... Wire Customers"; and that by January 2024 all customer funds sent from the brokerage to both banks were held in omnibus accounts in the parent's name rather than the brokerage's or the banks'. Synapse's terms of service, to which the opt-out notices referred customers, said that Synapse did not and would not control, transmit or hold their funds, and customers were not told otherwise. These are findings of the same settlement order, to which Paverman consented without admitting or denying the allegations and which bind no other respondent. ¹

analysisJeffrey Alan Stanley was registered as a general securities principal through Synapse Brokerage from February 2023 to June 2024. FINRA says he functionally acted as its chief executive before December 2023, supervising the firm, approving account openings and transfers and dealing with Synapse, and held the titles of president and chief executive from December 2023 to May 2024; the firm reported his voluntary departure on June 21, 2024, and California's DFPI describes him as chief executive and a control person from December 2023 to July 2024. His earlier posts included chief operating officer of Insperex (2020-2022) and chief operating officer and chief risk officer of D.A. Davidson & Co. (2012-2020). Mark Elliot Paverman, whose FINRA record shows him as principal of his own compliance consultancy in Boca Raton, Florida since June 2019 and who was registered with about 30 other member firms, was registered through the brokerage from January 2021 to January 2025, recorded as its president and chief executive from March 2021 to December 2023 and as chief compliance officer afterwards. DFPI states that Sankaet Pathak was a control person of the firm from June 2020; the end date is cut off in the retained copy of its accusation. ^{1 2 3 4 5}

analysisIn the same settlement findings, to which Paverman consented without admitting or denying the allegations and which bind no other respondent, FINRA describes a broker-dealer run by its parent's staff. Stanley was employed by Synapse Financial Technologies from January 2023 to May 2024, worked only on the brokerage and reported to the parent's unregistered chief compliance officer; the only other registered employee split his time with the parent and reported to its chief technology officer; the rest were part-time outside consultants, among them Paverman, the anti-money-laundering officer throughout, who spent about five hours a week on the firm. Under an amended intercompany agreement Stanley signed in December 2023, the brokerage paid the parent for personnel and services. Unregistered staff of the parent onboarded customers, negotiated with fintechs, designed the technology, kept the ledger, directed transfers, handled anti-money-laundering reviews and chose the program banks; on at least two occasions they moved money out of a brokerage account without approval from any registered person, and no one at the brokerage had direct access to its ledgers. ¹

analysisFrom about July 2023 to February 2024 fintechs emailed opt-out notices worded by Synapse Brokerage: unless end users contacted the firm, a brokerage account would be opened in their name and their deposit-bank funds moved into the program, and continued use of the app meant accepting the brokerage's customer agreement. In FINRA's examples, about $200 million of some 650,000 end users moved from the first deposit bank within eight days of one fintech's notice of October 5, 2023, and about $60 million of some 32,000 users within a week of another's notice of October 13. By the end of November 2023 more than two million accounts had been opened and about $388 million transferred; at one fintech only about 29,000 of some 90,000 recipients opened the email and 123 clicked the links to the agreement. FINRA found that Stanley approved the opening of more than two million accounts without any affirmative customer authorisation. These are findings of the same settlement order, to which Paverman consented without admitting or denying the allegations and which bind no other respondent. ¹

analysisAround December 31, 2023, FINRA found, the first deposit bank stopped sweeping brokerage customers' deposits into the brokerage, without customers being told, and Synapse began reallocating customers' funds by changing values on its ledger with no accompanying transfer, so that only Synapse and the brokerage could know. On or about April 30, 2024, a week after the bankruptcy filing, Synapse moved more than $85 million of one fintech's end-user funds on its ledger from the program banks to the first deposit bank, offsetting it by moving other fintechs' users' funds the other way, with no wire or ACH transfer and no customer authorisation; the reallocations appeared on Synapse's trial balance reports. These are findings of the same settlement order, to which Paverman consented without admitting or denying the allegations and which bind no other respondent. ¹

analysisFrom May 11, 2024 brokerage customers could not withdraw any money, because withdrawals had to pass through the deposit banks: the first had refused to process payments for the brokerage and the second had terminated its agreement. About $110 million recorded at the program banks was returned at the end of May and in June 2024. Funds allocated to the first bank, largely the money reallocated on April 30, stayed frozen until it began releasing funds in November 2024, and those customers recovered only a fraction. Stanley had routinely approved transfers from the program banks to Synapse's omnibus account at the second bank to meet its $60 million minimum, without telling customers; that bank froze about $62 million from May to August 2024 and had returned about 90% by the end of September 2024. These, too, are findings of the Paverman settlement order, to which he consented without admitting or denying the allegations and which bind no other respondent. ¹

analysisBy an order of July 10, 2024, after Synapse Credit LLC did not request a hearing on a June accusation, the Commissioner of California's Department of Financial Protection and Innovation (DFPI) revoked its California Financing Law licence (No. 60DBO-113301); DFPI later said it was the first regulator to take formal action after the bankruptcy. DFPI began examining Synapse Brokerage's books on June 14, 2024, and on October 11, 2024 Commissioner Clothilde V. Hewlett issued an accusation and notice of intent to revoke its broker-dealer certificate: the firm had not produced required records, its net capital in May 2024 was $217,972, $32,028 below the $250,000 minimum, and it had filed no monthly interim financial reports from May to September 2024. It requested no hearing, and on January 22, 2025 the Acting Commissioner revoked the certificate, first issued on March 22, 2010. DFPI's statement in the firm's regulatory record notes that the parent's bankruptcy left thousands of clients unable to reach their funds and that, while some had their funds returned, an estimated $60 million or more was unaccounted for as of January 2025. ^{1 2 3 4 5}

analysisFINRA suspended Synapse Brokerage on March 18, 2025 for failing to file its December 2024 annual audit report and to keep its Form BD current and accurate, and expelled it from membership on June 23, 2025 because it had not asked for the suspensions to be lifted within three months. ⁴

analysisOn August 28, 2025 FINRA's Department of Enforcement filed a disciplinary complaint (No. 2023080111701) against Stanley and Paverman. It alleged that Stanley failed to reasonably supervise the program, approving hundreds of thousands of account openings and transfers without adequate customer authorisation, with the firm under him failing to detect the ledger reallocation of tens of millions of dollars to a bank, and that he failed to supervise the parent's unregistered staff or investigate red flags of ledger discrepancies; and that Paverman caused the firm to fail to preserve electronic communications and falsely certified that it contracted directly with its records vendor and had independent access to its records. These were allegations at filing. Stanley's attorney, Paul Vorndran, said Stanley denied engaging in any misconduct and intended to defend himself vigorously; Paverman and Pathak did not respond to a trade-press request for comment. Both respondents later settled without admitting or denying the allegations, Paverman on January 28, 2026 and Stanley on May 22, 2026. ^{6 7 8 9}

analysisIn his settlement Paverman consented to findings that he caused the firm to violate FINRA Rules 4511 and 2010 by failing to preserve communications from December 2023 to June 2024, including those of parent-company staff doing brokerage work, and that in May 2023 he gave FINRA a false undertaking that the firm contracted directly with its records vendor and had independent access to its records. He was suspended in all principal capacities for 12 months from February 17, 2026, fined $20,000 and required to requalify. Stanley consented to findings that from at least September 2023 to May 2024 the firm, acting through him, lacked a supervisory system reasonably designed to ensure compliance: he approved account openings and transfers of customer funds without adequate authorisation, let the non-member parent perform significant brokerage functions, including keeping the ledger used to reconcile customer balances, without supervision, and did not investigate red flags of discrepancies with the banks' ledgers. He was suspended from any principal capacity for 12 months and from all capacities for four months and must requalify by examination; in light of his financial status no monetary sanction was imposed. ^{8 10 9}