I've got to believe more regulation is coming after the Synapse implosion. For the unaware, this is generally how this process works with fintechs:<p>1. You have the underlying FDIC ensured partner banks. However, to be clear, FDIC insurance only covers if <i>the bank</i> fails. Synapse itself isn't covered by FDIC insurance.<p>2. Synapse operates as a middleman, where they provide "ledgering tech" (more on that below) and APIs that connect to the underlying partner bank. For example, say you're a startup that offers business services to sole proprietors and small businesses, and you want to be able to let your customers open a bank account. You connect with Synapse and a partner bank, so that you can use Synapse APIs from your website to open accounts for your customers.<p>3. The important point, though, is at the partner bank there is usually a single "FBO" (for benefit of) account on the bank's core banking system. So when end customer opens a new account, a new account isn't actually created in the partner bank's core banking system. Instead, Synapse keeps track of all the individual customers funds separately in their own ledger that they keep.<p>It appears here that there is a big discrepancy between what Synapse's ledgers say they owe end customers, and what is actually stored with the partner banks. And that's the part where I think regulation is coming. There are almost no checks right now to ensure that the ledgers of these "bank API middlemen" (and there are a bunch of them) actually reconcile with the underlying funds kept at these partner banks. And many of these fintechs tout "FDIC insurance", but again that only protects you if an underlying bank goes out of business, not if the uninsured middleman is doing bad math.<p>And, to be honest, I think regulation would be a great thing here. A lot of these "banking-as-a-service" middle men <i>did</i> provide a lot of tech value (e.g. easy to access APIs - think similary to what Stripe provided for card payments but for banking), but apparently played fast and loose with actually keeping track of customer funds correctly.
Does this trigger the FDIC to step in? Was Synapse FDIC insured or just the underlying banks? Or is synapse "shadow banking" gone wrong?<p>I don't know why this isnt bigger news, and I dont get why there aren't clear answers.
“Customer savings” are missing… or in other words the banks money?<p>Reminds me of the Mitchell and Webb skit about identity theft: <a href="https://m.youtube.com/watch?v=CS9ptA3Ya9E" rel="nofollow">https://m.youtube.com/watch?v=CS9ptA3Ya9E</a>
I predict the guilty will pay someone off and never be charged.<p>If I am wrong and they are charged, they will be fined/pay restitution of less than $5 million and spend 6 months or less in jail.
Is this why Copper shut down? Damn, there goes my 70 bucks I had in there. And they keep sending me emails telling me to link a bank account. Yeah, good one guys. I’m just gonna give all my bank details to the company that has just now proven to be totally incompetent and untrustworthy. You can mail me a check.