Trustee says $85 million of customer savings is missing

106939345 1631200219009 gettyimages 1234430158 FDIC OCC SENATE.jpeg

106939345 1631200219009 gettyimages 1234430158 FDIC OCC SENATE.jpeg

Jelena McWilliams, the chair of the Federal Deposit Insurance Corporation (FDIC), spoke during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C. According to the court-appointed trustee in the Synapse bankruptcy, partner banks of fintech intermediary Synapse are facing an $85 million shortfall in funds compared to what depositors are owed.

Customers of fintech companies that utilized Synapse to connect with banks had $265 million in balances. However, the banks only had $180 million associated with those accounts, as reported by trustee Jelena McWilliams in a document filed recently.

This missing amount of money is at the core of the worst crisis in the U.S. fintech sector since its emergence following the 2008 financial crisis. Over 100,000 customers of various fintech companies have been unable to access their savings accounts for almost a month since the collapse of Synapse, a startup backed by Andreessen Horowitz, due to disputes over user balances.

While Synapse and its partners have accused each other of mishandling balances or maintaining incorrect records in court documents, McWilliams’ report is the first external attempt to determine the extent of the missing funds in this situation.

Since her appointment as trustee on May 24, McWilliams has been working with four banks to reconcile their ledgers in order for customers to recover their funds. However, more information is needed for the banks to complete the project, including understanding how Synapse’s brokerage and lending business may have affected fund flows.

Furthermore, it is still unclear what happened to the missing funds, making the situation even more complicated. Unfortunately, there are no funds available to pay external forensics firms or former Synapse employees to assist in the investigation, as Synapse terminated all employees on May 24.

McWilliams presented various options to Judge Martin Barash at a hearing on Friday to allow FBO customers to regain access to their funds. However, Barash expressed uncertainties about how to proceed given the unprecedented nature of the case and the fact that the depositors’ funds did not belong to the Synapse estate.

Despite efforts to resolve the crisis, it remains a challenging situation with no clear solution in sight.

Jelena McWilliams, chair of the FDIC, reported an $85 million shortfall in funds held by partner banks of Synapse, a fintech middleman, compared to what depositors are owed. This has led to a crisis in the fintech sector, with over 100,000 customers unable to access their savings. McWilliams is working with various banks to reconcile accounts, but the source of the missing funds remains unclear. Options for resolution include partial payments to affected customers. Judge Martin Barash expressed uncertainty about the court’s role in resolving the crisis, calling it uncharted territory.

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