The Prospects for Synapse’s Banking-as-a-Service Startup Continue to Decline
In recent weeks, the fortunes of Synapse, a banking-as-a-service startup that filed for Chapter 11 bankruptcy in April, have taken a turn for the worse. The United States Trustee has filed an emergency motion to convert the company’s debt reorganization into a liquidation Chapter 7, citing gross mismanagement and a lack of reasonable likelihood of reorganization.
The Background
Synapse was founded in 2014 by Bryan Keltner and Sankaet Pathak with the aim of providing a platform for banks and fintech companies to develop financial services. The company had raised over $50 million in venture capital from investors such as Andreessen Horowitz, Trinity Ventures, and Core Innovation Capital.
However, things took a turn for the worse when Synapse filed for Chapter 11 bankruptcy on April 22. At the time, it was announced that TabaPay would acquire its assets for $9.7 million. However, this deal fell through just days later due to issues with banking partner Evolve Bank & Trust.
The Infighting Continues
Despite the collapse of the asset sale, Synapse’s founder Sankaet Pathak alleged that former partners owed the company millions. The partners in question denied these allegations, stating they had no merit.
Evolve Bank & Trust filed a motion to restore access to Synapse’s dashboard system after alleging it was denied access to the startup’s computer systems and had been forced to freeze end-user accounts. The U.S. Trustee alleged that Synapse "inexplicably cut off access to its computer systems on a weekend."
The Consequences
Synapse admitted that it had no more cash or approval to use any cash after Friday, May 17. A hearing is scheduled for the U.S. Trustee’s emergency motion on May 17.
However, there may be hope yet for Synapse. Some experts believe that a sale of the company’s assets could still occur, potentially with a different buyer.
The Importance of Synapse
Synapse was one of the leading players in the banking-as-a-service space. Its collapse has sent shockwaves through the industry and highlights the challenges faced by fintech startups.
The decline of Synapse serves as a reminder that even successful companies can fall victim to unforeseen circumstances. The outcome of this situation will be closely watched by investors, entrepreneurs, and industry experts alike.
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