Banking startup Synapse faces potential bankruptcy

Banking startup Synapse faces potential bankruptcy

"Banking Startup"

Synapse, a “banking-as-a-service” startup, is currently embroiled in legal and financial challenges, which led to potential liquidation through Chapter 7 bankruptcy, as proposed by a US Trustee. Allegations of poor management and oversight have only amplified these problems.

The situation for Synapse is critical. If the US Trustee’s proposal to convert Chapter 11 debt restructuring into liquidation under Chapter 7 is accepted, this could signify the end for the fintech firm. The Trustee cites ongoing losses and low chances of successful restructuring as the rationale for the proposal.

Synapse’s founder, Sankaet Pathak, is making claims of substantial amounts still due from former associates, adding more complexity to the financial entanglement the startup is facing. All these claims are met with significant skepticism, leading to doubts about Synapse’s real financial position.

Founded in San Francisco in 2014 by Bryan Keltner and Sankaet Pathak, Synapse aims to aid banks and fintech firms in creating financial services. Despite challenges, Synapse has maintained this vision, even after the Chapter 11 declaration.

Synapse’s looming bankruptcy amid legal disputes

Synapse continues to partner with numerous financial organizations and fintech startups.

However, one of these partnerships led to a legal dispute. Evolve Bank & Trust took legal action against Synapse, who they accuse of blocking access to a crucial system. The fallout led to the temporary suspension of customer accounts and hurt Synapse’s financial state. If the dispute continues, the US Trustee argues this could lead to Chapter 7 bankruptcy.

A hearing regarding the US Trustee’s request will occur on May 17. Despite the current situation, there is hope that financial support from Synapse’s fintech clients may help keep the company operating under Chapter 11.

See also  Yen depreciation speculated as intentional Japanese move

The ongoing dispute caused Evolve to suffer a blockage on their critical account and transaction data dashboard on May 11. This situation hindered the bank’s monitoring of transactions and slowed all payment and card-related functions until the dashboard access was restored.


About Our Editorial Process

At DevX, we’re dedicated to tech entrepreneurship. Our team closely follows industry shifts, new products, AI breakthroughs, technology trends, and funding announcements. Articles undergo thorough editing to ensure accuracy and clarity, reflecting DevX’s style and supporting entrepreneurs in the tech sphere.

See our full editorial policy.

About Our Journalist