Evolve Bank & Trust has announced efforts to return additional funds to end users affected by the Synapse bankruptcy. The bank is working with Ankura to verify financial transactions and determine the distribution of funds. However, it has acknowledged that further data from other banks within the Synapse ecosystem is required to complete the reconciliation process. Many users have been unable to access their funds since Synapse ceased operations, and the resolution process is ongoing.
Following the collapse of Synapse, which provided banking services to fintech companies, thousands of users experienced fund access issues. Previous reports indicated that Synapse managed billions of dollars before its failure, creating significant financial disruptions. The Federal Deposit Insurance Corporation (FDIC) cited the Synapse situation when proposing stricter recordkeeping regulations for banks handling third-party custodial accounts. This reflects growing regulatory scrutiny over fintech-bank partnerships.
How is Evolve Bank handling fund distribution?
Evolve stated that it will begin disbursing funds to some end users via PayPal (NASDAQ:PYPL) and mailed checks starting March 6, 2025. The bank emphasized that this distribution is only possible for a subset of customers due to incomplete transaction data. Evolve is collaborating with other banks in the Synapse network to gain access to additional records that can help clarify where remaining funds are held.
“As a result, Evolve will be disbursing more funds to a subset of End Users on or about March 6, 2025, via PayPal and checks sent via the U.S. Postal Service,” the bank stated in an update.
What challenges remain in recovering all funds?
Unreliable ledger data from Synapse has complicated the reconciliation process. Evolve has reiterated that a full resolution depends on cooperation from other financial institutions involved in the Synapse network. Without complete transaction records, determining the exact location and amounts of end-user funds remains uncertain.
“If and when we receive the necessary data from the Synapse ecosystem banks, we expect the comprehensive, ecosystem-wide reconciliation will determine which banks hold End Users’ funds, how much each bank holds, and what still needs to be disbursed to End Users,” Evolve said.
Regulatory bodies have taken note of the situation, with the FDIC proposing new rules to improve transparency in custodial accounts held by fintech firms at banks. These regulations aim to prevent similar disruptions in the future by requiring clearer recordkeeping practices.
As Evolve continues its reconciliation efforts, affected users remain uncertain about the timeline for full fund recovery. The situation highlights broader challenges in the fintech sector regarding data accuracy and banking partnerships. Users awaiting fund disbursement may need to monitor updates from their respective banks, as resolution efforts depend on multiple institutions working together.
