Yotta, a fintech startup co-founded by Adam Moelis in 2019, aimed to help Americans save money but now faces a crisis that has severely impacted its 85,000 customers.
On May 11, a dispute between Yotta’s banking partners, Synapse and Evolve Bank & Trust, led to account freezes for Yotta and other startups.
Synapse declared bankruptcy earlier this year following client losses over disagreements on tracking customer funds, locking out Yotta customers from $112 million in savings.
Yotta co-founder Adam Moelis (L) emphasizes the necessity of returning locked funds, questioning Synapse’s role.
The core issue is a disagreement between Synapse and Evolve on how Yotta’s funds are allocated between them and other banks Synapse worked with.
Synapse has not commented, while Evolve blames Synapse for the breakdown. This situation exposes the risks of the “banking as a service” model, which allows fintech companies to quickly offer banking services via intermediaries like Synapse.
Despite the significant impact, regulators have not intervened, possibly due to the issue’s limited scope and the affected customers’ lack of wealth.
Moelis believes larger scale or wealthier affected individuals might have prompted quicker regulatory action. The Federal Reserve and FDIC have declined to comment but have urged banks to manage fintech partnership risks.
Recent developments in the Synapse bankruptcy case offer hope. Former FDIC Chair Jelena McWilliams has been appointed as trustee to develop a plan to return funds to their rightful owners.
Moelis remains neutral in the Synapse-Evolve dispute, focusing on resolving the situation for Yotta’s customers, emphasizing that the money must be accounted for and returned.
