When Fintech Apps Break: Lessons From Juno, Yotta, Copper, Yieldstreet Wallet, Synapse, Evolve Bank Lawsuits

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What happens when the technology behind a Fintech app breaks down? We found out last week, when unfortunately millions of users lost access to their funds (and still haven’t gotten it back as far as I can tell, as of this writing 5pm ET 5/20/24). That’s a week and counting! Spoiler alert: My understanding is it was really the relationships between humans arguing about money that broke down.

A little Fintech background. When you open an account with a Fintech App (financial technology company), you are often presented with some fine print: “*[Fintech App] is not a bank. Banking services provided by [Real Bank], Member FDIC.” What does that mean? It means that the Fintech is charge of managing the customer-facing interactions – a software layer if you will – and the bank provides access to FDIC insurance and the banking transaction infrastructure. The bank usually opens up an “FBO account” for the fintech. Here is a good definition from Treasury Prime:

An FBO Account (For-Benefit-Of Account) is an umbrella fiduciary account that pools various funds “for the benefit of” a number of beneficiaries, such as end-users, without the fintech assuming ownership interest in the accounts. For fintechs that want to control more of the user experience and not leverage pre-defined bank processes, a fintech may choose to open an FBO account instead. […]

The fintech company can open up the FBO account that sits on their partner bank’s core for the benefit of all of its customers, and use it to establish virtual accounts. In this scenario, the fintech’s end customer would have a sub-account (or “ledger” account) that sits within the umbrella FBO account. The fintech can then track these virtual accounts on a ledger with the support of its BaaS provider.

Deposits held by the customer as a beneficiary to the FBO account are FDIC-insured on a pass-through basis to the same extent as if the deposits were made directly, assuming specific requirements are met.

Significantly, the fintech has no ownership interest in the FBO account and has no control over the funds. The bank maintains control over the funds at all times.

In some cases, the bank itself provides and markets this “Banking as a Service” to external fintech companies. In other cases, there are standalone “Banking as a Service” (BaaS) companies that are essentially the middlemen between fintechs and banks. This was the case with Juno, Yotta, and Copper. (I would not open an account with any of these places right now. Read on for the drama.)

I’m not an expert on these matters, but this is my best understanding of what happened:

  • Synapse, a BaaS provider, had a dispute over millions in unpaid fees and misappropriated user funds with another fintech, Mercury, and the same Evolve Trust & Bank. (Mercury later went to partner directly with Evolve.) Synapse filed for bankruptcy in 2023. Another company, Tabapay, was in talks to acquire Synapse, but that was announced as cancelled on May 9th, 2024. Synapse blamed Evolve Bank & Trust for not resolving existing issues so that the acquisition could move forward. Another player, Lineage Bank, did payment processing for Synapse and also cut off Synapse on May 9th, 2024. They also still holds millions of user funds in an FBO account.
  • On May 11th, 2024, Synapse blocked Evolve from accessing to their “Dashboard” which had the transaction ledger data of every fintech user from Juno, Yotta, and Copper. Since this meant that Evolve Bank & Trust couldn’t verify the reason for money coming in and out of the FBO accounts held at their bank, they completely froze access to those FBO accounts.1 This meant that ACH transfers in and out no longer worked, and debit card transactions also failed.
  • Synapse says that they restored this Dashboard access on May 13, 2024.2 Evolve disputes this and says that they have not received adequate settlement and ledger reports.3 Evolve and Synapse continue to argue inside a US bankruptcy court.
  • Jason Mikula (Fintech Business Weekly, @mikulaja) has been providing some of the most direct and timely insight on this situation.
  • Right now, things are still a dumpster fire. 🗑🔥 The FDIC apparently is not getting involved because this is not a bank failure. The bankruptcy judge is basically looking down at two fighting children and yelling “You two! Sort it out!” Meanwhile, more than entire week has passed and the end customers still haven’t been able to access their funds as this writing 5pm ET 5/20/24.

In the previously-mentioned Treasury Prime article, it goes on to mention the heightened risk of an “intermingled FBO model” setup. I don’t know if this is what Synapse offered, but it does ring several alarms 🚨:

Some BaaS providers offer an intermingled FBO model through bank partnerships. In this particular model, the BaaS provider opens one FBO account for the benefit of all of its fintech end-users across various companies, rather than have each fintech open an FBO account with the partner bank directly.

The level of risk in this arrangement could be profoundly greater than the risk of a traditional FBO account.

[…] Even more concerning to the fintech in this arrangement is the significant ledgering precision and reconciliation required in this model. Any slight ledgering error or calculation gap could require rebalancing and re-ledgering all ledger accounts or sub-accounts in the entire FBO account. This could potentially create a domino effect and impact the records and corresponding funds of a large number of accounts.

The takeaway? Fintechs are still a new form of banking that isn’t well-regulated and things can break. Even though pass-through FDIC insurance applies, I would still never make any fintech my primary day-to-day checking account due to the possibility of short-term loss of access. Now, I’d bet that I am in the top 0.1% of people with the most fintech accounts opened. I’m probably nearing triple digits. I still plan to open new accounts, try out new features, and earn sign-up bonuses and perks. Even if I try to perform due diligence, I know that these folks learned from the school of “ask for forgiveness, not permission”. If startups choose to “move fast and break things”, it may take a while to fix them. Not all fintechs are the same, but never put all your eggs in one basket.

I still expect all customer funds to be released eventually, but I know that the lack of access to funds can be very painful for people and that is very unfortunate. It bugs me that you know that the rich CEOs aren’t being forced to negotiate with landlords, credit card companies, medical providers, and so on. Here is a link to file a CFPB complaint.

I don’t plan to do any future business with any of the parties involved. The biggest fintechs involved seem to have stuck with a bankrupt BaaS provider for several months because they didn’t find a better option (or nobody else wanted to deal with them). Yotta did lottery-type games. Juno did crypto. Per an email from Juno:

Over the last 6 months we have attempted several times to diversify our banking stack and even spent 3 months of engineering resources to integrate with a new partner. Given that our platform offers crypto adjacent services, it has been incredibly difficult to get a final approval from a bank partner to onboard customers. This is a broader problem specific to the crypto industry due to the current regulatory climate not being favourable to crypto or crypto adjacent companies.

Copper, Juno, and Yotta all neglect to mention this crisis on their front pages. They should be more transparent with their issues. With the public anger growing, Yotta instead went and completely deleted their X/Twitter account. Wow.

1 From TechCrunch:

An Evolve spokesperson confirmed to TechCrunch that on May 11, “Evolve Bank & Trust faced an unexpected challenge when Synapse abruptly and without prior notice disabled our access to an account and transaction information dashboard controlled by Synapse and needed by Evolve. This sudden disruption significantly impacted our ability to maintain the visibility and transparency that Evolve needs to have into accounts and transactions. In response to this situation, Evolve took swift and decisive action to safeguard the security of end user funds and ensure compliance with applicable laws. As a precautionary measure, we made the difficult decision to freeze payment and card activity until we could successfully re-establish access to the dashboard as well as receive necessary account and transaction data and reports. While we understand the inconvenience this may have caused, this step was taken with the utmost consideration for the security and integrity of end user accounts. Evolve continues to work diligently to obtain necessary information from Synapse.”

2 From Medium written by the Synapse founder:

The continuation of the account freeze by Evolve, despite the restoration of Dashboard access on Monday, May 13, 2024, is unsupportable. Freezing the funds has been unnecessary and punitive, causing significant harm to depositors who rely on access to their funds for essential needs.

3 From Forbes:

The hearing brought no end to the dispute that led Evolve to block customer access to funds, after, it says, Synapse cut off its access to a dashboard necessary for the bank to run compliance screens and determine how much money each individual fintech customer actually has in pooled accounts maintained for their benefit. Synapse says that access was restored this past Monday, but Evolve insists it still doesn’t have what it needs.

Barash did what he could to force a resolution. He ordered Synapse to provide settlement and ledger reports that Evolve Chief Technology Officer Christopher Staab testified the bank had not received. He also ordered executive and technical team members from Evolve and Synapse to meet and confer by Monday to discuss how to restore consumers’ access to their funds.

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  1. Jonathan Levine says

    This reminds me, what are you able to get your bonus from the other Fintech everything money?

    • Not exactly sure what you are asking?

      • Jonathan says

        Apologies, to clarify, I think you had posted about another Fintech recently everything money that’s partnering with Jiko securities, and coastal community bank. Just curious, if you had any troubles accessing money from that Fintech or getting the bonus

        • You mean Evergreen Money? Yes, I got the $250 bonus as promised with no issues. I’ve still got my money with them, seeing how they work out and operate.

          • Jonathan says

            Oh good to hear, thank u! I wasn’t familiar with them so I contacted coastal community and Jiko and they both verified that they are partnering with Evergreen. Not used to working with Fintech. Sorry to get off topic on that one but thank you for the response!

  2. joshua katt says

    Excellent analysis Johnathan, digging through the BS and spin. Here’s one more:

    Notice there was plenty of money to pay bankruptcy lawyers who always get paid upfront first. And they will argue with each other long enough justify & exhaust their fees before settling.

  3. FYI, you dated this 2014 ?. Just letting you know so your archives for posterity won’t be wonky. (2nd sentence)

  4. CF Frost says

    Do we know if any FINTECH Banks used Synapse?

    Is there a way to determine if an online bank uses Synapse prior to?

    Was it just Juno, Yotta, and Copper – those don’t appear to be banks of any sort – but some sort of gaming/crypto app thing, that used Evolve as a Bank??

    • Those fintechs are the biggest ones that all offered checking accounts complete with Evolve routing numbers and individual account numbers. People had their direct deposits go there. Juno was paying 5% APY for a while when nobody else really was.

  5. I still have some cash frozen at Juno. What’s strange is that I had an ACH pull started from Vanguard around 5/14 and it shows up as “funds received” even though Juno app still shows my funds as not debited by Vanguard. Either Evolve B&T paid up or Vanguard simply extended credit to me without telling me. I used to send all my paycheck to Juno because of 5% APY and the 2x Juno points on direct deposit convertible to gift cards but that gravy train has stopped now: no points, no 5% APY, and Juno points suffered yet another 100% depreciation, 2nd or 3rd in a year. There’s nothing to keep me with Juno now. I’ll just wait until they figure out the ACH thing and close my account then.

  6. Thank you for bringing me up to speed with this write up. I have funds stuck at Yotta and tried to withdraw them on 05/12, but its still processing. I really hope a resolution can be reached soon.

  7. Garth Woods says

    Yieldstreet used Synapse, and customer wallets have been frozen for a few weeks

    • Yes, please add Yieldstreet to this article. Yieldstreet users are affected as well and finding this article will help them know to know what’s happening.

  8. You know what’s the worst? They say direct deposits are dysfunctional, but they haven’t rejected the direct deposit yet, which prevents my payroll provider to route the paycheck to a functioning checking account. It’s been almost a week. Isn’t it borderline fraud if they’re keeping our direct deposits while saying they won’t be supporting direct deposits during this mess?

  9. Stephanie says

    I send funds via direct deposit to Yotta every 2 weeks for my daughter to use the card as her debit card. She’s young, so it works, and not all of my funds are tied up there. I never received the deposit with Yotta this week (5/15/24). Yotta wouldn’t reply to emails, chats, or phone calls. The money is just missing.

  10. Patrick Ryan says

    I also believe in doing due diligence. In this case, my due diligence was limited to reading what Yotta told me in the email and consulting the terms of service. By that measure, Yotta is FDIC insured. But if you look at it from a regulatory perspective and measure it by law and practice, there’s no insurance whatsoever. Here’s how I analyzed it, but it was still wrong. https://www.linkedin.com/pulse/fdic-insurance-yotta-patrick-spaulding-ryan-jtjzc

    • I agree, sometimes you do what you can, but it’s not enough. This seems to be how regulation works in the US, though. You wait until a crisis, and then you use the public outcry to actually put in regulations. If the outcry isn’t great enough, you create some sort of self-regulatory agency like FINRA and hope their collective self-interest keeps them in line.

      The idea of intermingled FBO accounts sounds completely crazy, if that is what Synapse was doing. They serviced a LOT of fintechs, and they are all having issues. Yieldstreet Wallet. Mainvest platform.

    • I think this is also important to keep in mind with the arrival of AI. Something big and bad will happen before they start to properly regulate it.

  11. Corey Persky says

    I honestly do not know what is true and what is false anymore.
    Fact: May 11th is when the access was supposedly shut down (a Saturday)
    Fact: May 12th I had a transfer (Cash App) go into my account.
    Fact: May 12th, I went to access these funds (immediately), and was unable to.
    Fact: May 22nd I am still unable to access these funds.

    Everything in between is BS.

    This stuff seems to be happening way too often.

  12. paul gipson says

    I’m not a customer of Juno/Synapse so, as the saying goes “no dog in that fight”. But I have been considering Raisin for some of my money. And I guess I don’t see a lot of difference in the services. If, as a lot of the reporting seems to indicate, FDIC insurance coverage doesn’t apply to FBO accounts established through Juno (or the other services) why would such accounts established through Raisin be covered?

    • Raisin most likely does use FBO accounts, but I don’t necessarily agree with any statements that the passthrough FDIC insurance is invalid for FBO accounts. Some brokerages do offer cash management options that include FDIC insurance for just the cash sweep, and so there is language that if your funds are not in the FDIC account then you will not have FDIC insurance. If your money is in a brokerage account, then it is covered by SIPC and not FDIC. Yotta apparently opened brokerage accounts for some of their customers, I’m not a Yotta customer so I’m not 100% sure. Raisin does not open any brokerage accounts AFAIK. I do agree that if any fintech, including Raisin, messes up the reconciliation of transactions, there can be interruption in access to your funds.

  13. Michaael says

    “A house on fire”
    said a lawyer representing Yotta Technologies, in Synapse Financial bankruptcy court this past week.
    Another lawyer called it “a slow moving dumpster fire”

    Been following this situation for the past two weeks, as I am also choked up with losing access to my funds.
    Although, I do consider myself fortunate, as no longer having to live paycheck to paycheck and not immediate, adversely affected.

    For myself, reading information provided by Fintech Business Weekly, author by Jason Mikula has provided detailed, unbiased information regarding this whole state of affairs. Stuff you all probably already know but would like to share it anyway.

    Would like to re-post here, to spark a relief valve of sorts (full disclosure, it is helping myself to participate in some capacity) and to provide this information for conversation.
    Although looking at the data and discussions might only add to this burning fire.

    A few links, from Jason Mikula on LinkedIn, the first link is to his newsletter, Fintech Business Weekly, has a nice summary and a lot of details in its write up.

    “Synapse Claims Evolve Owes $50M; Evolve Says Synapse’s Ledgers Don’t Add Up,
    Synapse CEO, GC In Europe While End Users Remain Unable To Access Funds”


    Looks like something like $150,437,659.89US is tied up and frozen, (see the screenshot of an Synapse excel file)

    “New Synapse bankruptcy filing claims Evolve Bank & Trust owes $111m to Yotta depositors, $26.5m to Juno depositors, $1.5m to Gig Wage:”


    “New Synapse court filing says Evolve Bank & Trust owes $150 million to depositors, claims Evolve & Mercury “improperly transferred” over $49 million of customer funds.”


    Jonathan your comment about “humans arguing about money” is right on.

    Hope this growing fire with sharply conflicting claims, disorderly shutdown of Synapse, months of failure to settle balance activity, involving 100 fintechs with 10 million customers, and lawyers doesn’t

  14. Jonathan, here’s a related story someone posted on Reddit about debit card fraud on their Fidelity ATM card.
    There were numerous parties involved (Fidelity, BNY Mellon, PNC) each pointing responsibility at the other. Even after formal complaints to regulators, the parties still denied responsibility, despite what the debit card agreement said:

  15. Adding insult to injury, it looks like Juno’s interest rate has been lowered to zero as of 5/16/24.

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