Reconciliation Update: November 27, 2024
Synapse End Users:
We understand how frustrating this process has been for End Users who are still wondering where their money is in the aftermath of the Synapse Financial Technologies, Inc. (“Synapse”) bankruptcy. We share that frustration and are working to try to bring a fulfilling closure for all parties involved. But the reality is that Synapse moved the majority of those funds away from Evolve Bank & Trust (“Evolve”), likely to other banks it was working with before it went bankrupt.
Today, we want to share an update on Evolve’s actions as well as some important information related to the location of your money.
Returning End User Funds
Following a thorough reconciliation process, conducted by experts at Ankura Consulting, we are confident we have accurately reconstructed End Users’ ecosystem balances and their balances at Evolve using transaction data from the Federal Reserve System (“Fed”), our own records, and the Synapse MongoDB database.
- Disbursing Funds to End Users. Starting on November 4, Evolve notified approximately 118,000 End Users how to log in to reconciliationbyevolve.com, determine their reconstructed Synapse ecosystem balance, view the amount of their funds held at Evolve, and elect a payment method to receive their funds.
End Users receiving funds from Evolve either (a) already received their payment through a direct online payment service; or (b) elected an alternate payment method to receive more than $24.5 million in funds. End Users who selected a payment method on the reconciliation website have already started to receive their Evolve funds.
- Asking Ecosystem Banks For Their Transaction Data. We know that a key question for many End Users is where their money is if it is not at Evolve. We conducted additional formal outreach to other ecosystem banks. As a result, we expect to work together to obtain the transaction data for Ankura to undertake the analysis to determine where End User funds are being held.
- Conducting a Comprehensive, Ecosystem-wide Reconciliation. Once we receive the data, Ankura will undertake the analysis to determine where End User funds are being held.
An Obvious Question – Where Is the Money?
One of the questions we have received consistently is this: If my money is not with Evolve, where is it? It is a fair question, but one Evolve can only partially answer today due to the limits on the data made available to us.
Beginning in October 2023, Synapse directed the transfer of End User funds held by Evolve to other banks participating in the Synapse Brokerage cash management program. It is helpful to remember that Evolve is just one piece of a larger ecosystem of companies touched by the Synapse bankruptcy. Synapse was an intermediary between multiple financial institutions and the numerous fintech companies with whom End Users signed up for accounts. In this role, Synapse placed money held on behalf of End Users at multiple ecosystem banks, and then directed the transfer of funds between them.[1] Synapse was responsible for tracking the movement and location of those funds by maintaining accurate ledgers across its ecosystem. It failed to satisfy this critical obligation.
What does this mean? It means that the vast majority of End User funds were moved out of Evolve to other banks in October and November 2023.
For example, Synapse directed Evolve to send all funds belonging to Yotta, Juno, and Yield Street End Users to another Synapse Brokerage ecosystem bank and these transactions were completed via the Federal Reserve System. This occurred in a series of transactions, in which Synapse moved more than $300 million away from Evolve, between October 11 and November 1, 2023. These include:
- On October 11, 2023, Synapse directed Evolve to send all of the funds belonging to Yotta End Users – approximately $182 million to another Synapse Brokerage ecosystem bank.
- On October 17, 2023, Synapse directed Evolve to send all of the funds belonging to Juno End Users – approximately $43 million to another Synapse Brokerage ecosystem bank.
- On November 1, 2023, a Synapse Brokerage ecosystem bank originated ACH transactions transferring more than $90 million in Yield Street End User funds from Evolve to another Synapse Brokerage ecosystem bank.
We know that the founder of the now-bankrupt Synapse has alleged Evolve still has funds, which would conveniently solve the problem of his inaccurate ledgers. But the reality, as Ankura’s analysis revealed, is that this is simply not true. Synapse directed the money be moved away from Evolve to other ecosystem banks in October and November 2023, and the founder of Synapse was aware these transfers took place.
Examples of those movements are illustrated below. Figure 1 shows the instruction Evolve received on October 11, 2023. Specifically, a Synapse employee provided instructions to Evolve to transfer millions of dollars of End User funds via ACH—in this case approximately $182 million for Yotta End Users—to the Synapse Brokerage Program. The instruction automatically generated what is called a “ZenDesk ticket” which captures the identity of the Synapse individual who requested the transfer, the Synapse employees who were copied on the request, and the amount of the request (circled in red).
Figure 1
Figure 2 shows the corresponding Evolve FBO account statement, showing the transfer of approximately $182 million from Evolve to another Synapse Brokerage ecosystem bank (all circled in red).
Figure 2
Similarly, Figure 3 shows the transfer of approximately $43 million for Juno End Users from Evolve to another Synapse Brokerage ecosystem bank.
Figure 3
Figures 4 shows three transfers of End User funds from Evolve to another Synapse Brokerage ecosystem bank, which includes all of the funds belonging to Yield Street End Users, totaling more than $90 million.[2]
Figure 4
Where those funds referenced in Figures 1-4 went after that is another important question. But unfortunately, not one Evolve can answer with the data it currently has. And it is not one the flawed Synapse ledger can answer either, which is why we engaged Ankura to conduct the reconciliation and have encouraged others to do the same.
We believe that the sharing of the transaction data by the other banks will help shed light on these funds and where they are. As we have said from the beginning, without a comprehensive review of transaction data from other institutions, it is hard to say what each other bank may hold for each individual End User. Once we receive the transaction data from the other banks—hopefully soon— Evolve will have Ankura conduct a comprehensive, ecosystem-wide reconciliation to accurately determine where the money is so that the right amounts can be returned to the right End Users.
Still to Come
While we have made progress, we know the work of addressing this challenging situation is not done. To that end, Evolve will continue pursuing several different pathways:
- End Users. We will continue to staff our dedicated call center to help individuals with the disbursement process and have sent a reminder message to End Users who have yet to respond to our outreach in one way or another. For a small number of End Users for whom our attempts to reach them by email have failed, we have sent them physical letters with substantially the same information contained in the email.
- Reconciliation Process Appeals. We are working as quickly as we can to review the appeals filed and to respond to those individuals. We are prioritizing review by the dates on which appeals were received, so customers who submitted an appeal earlier will generally receive responses before customers who submitted appeals later.
- Transaction History. End Users can always request their transaction history by emailing [email protected] or through the appeal process. End Users should include their name and the claim ID they received in the email or letter sent by Evolve Bank & Trust on or about November 4, 2024. We expect to begin mailing transaction histories to those that request them on or about December 13, 2024. This information can help illustrate where funds were transferred out of an End User’s account to another institution.
- Check Payments. For recipients who do not elect a digital payment method, we will send out check payments via U.S. Postal Service on or about December 19.
Getting to Closure
We believe End Users deserve to know where their money is. Period. To that end, we will continue to work to return the funds in our care to End Users in the appropriate amounts as quickly as we can. But we can only return End Users’ funds we hold.
At the same time, we expect to work together with the other Synapse ecosystem banks to obtain the transaction data needed for Ankura to undertake the analysis to determine where End User funds are being held — using reliable data, not the Synapse ledger. To do so, we will have Ankura analyze that data and help determine — as it has for Evolve —where End Users funds may be located. This is the simplest way for all End Users to know where their funds are and get them returned.
We know this process has been difficult for everyone involved. Thank you again for your patience and understanding.
Evolve Bank & Trust
[1] In addition, Synapse’s wholly owned subsidiary, Synapse Brokerage LLC, was the central hub of the company’s cash management program.
[2] The remaining funds transferred in these transactions belonged to End Users of other fintech platforms that migrated away from Evolve to Synapse Brokerage during the wind-down period.
