Savings app CEO says 85,000 accounts locked in fintech meltdown: ‘We never imagined a scenario like this’
What measures is Adam Moelis hoping to see from regulators in response to the financial disruption affecting Yotta customers?
Adam Moelis, the CEO and co-founder of Yotta, is hoping for regulatory intervention to resolve the financial disruption affecting Yotta customers. The disruption stems from a dispute between two of Yotta's banking partners, Synapse and Evolve Bank & Trust, which has led to the lockup of accounts at Yotta and other startups. Moelis hopes that regulators will step in to help resolve the situation and facilitate the release of funds to affected customers. He believes that the relatively limited scope of the issue and the fact that most of those affected are not wealthy may have contributed to the lack of regulatory intervention thus far. However, he is hopeful that some relief, such as a partial release of funds, may be forthcoming following developments in the bankruptcy court overseeing the Synapse failure.
How has the dispute between Synapse and Evolve Bank & Trust directly impacted Yotta and its customers?
The dispute between Synapse and Evolve Bank & Trust has directly impacted Yotta and its customers by causing 85,000 Yotta accounts with a combined $112 million in savings to be locked out. This has led to disruptions in customers' lives, forcing them to borrow money for essentials and causing uncertainty around upcoming events like surgeries or weddings. The situation has also caused heartbreak for Yotta's CEO, Adam Moelis, who never imagined a scenario like this could happen and that no regulator would step in to help.
How did the bankruptcy of Synapse contribute to the current financial crisis involving Yotta?
The bankruptcy of Synapse has contributed to the current financial crisis involving Yotta in several ways. Synapse, a fintech middleman, declared bankruptcy earlier this year after several key clients abandoned the firm amid disagreements over the tracking of customer funds. This led to a dispute between Synapse and Tennessee-based Evolve Bank & Trust, which in turn led to the lockup of accounts at Yotta and at least two dozen other startups3.
The heart of the dispute between Synapse and Evolve Bank involves a foundational function of finance: keeping accurate ledgers of transactions and balances. Synapse and Evolve disagree on how much of Yotta's funds are held at Evolve, and how much are held at other banks that Synapse worked with. This disagreement has resulted in 85,000 Yotta customers with a combined $112 million in savings being locked out of their accounts for the past three weeks.
The situation has exposed the risks in the "banking as a service" model, which allowed consumer fintech companies to quickly launch savings accounts and debit services, with firms like Synapse acting as a bridge between the startups and FDIC-backed banks that ultimately held deposits. The bankruptcy of Synapse and the subsequent lockup of accounts has upended lives, forced users to borrow money for food, and thrown upcoming events like surgeries or weddings into doubt.