Federal Regulatory Body Initiates Action Against Synapse Over Unaccounted Customer Cash
The Consumer Financial Protection Bureau (CFPB) is gearing up to file an adversary proceeding complaint against Synapse Financial Technologies, a bankrupt company that is currently under Chapter 11 bankruptcy protection. The CFPB alleges that Synapse has been involved in unfair acts or practices, specifically failing to maintain adequate records of consumers' funds and not ensuring these records matched those of partner banks.
This alleged failure has resulted in consumers losing access to an estimated $60-90 million that has yet to be recovered. The CFPB's complaint further states that this failure caused the funds to be unaccounted for, leading to frozen accounts and incomplete fund recovery for many consumers.
Following a hearing on June 27, Synapse's Chapter 11 trustee, Jelena McWilliams (former FDIC Chair), has been cooperating with the CFPB by providing data and responding to queries. The CFPB and McWilliams are currently negotiating a proposed stipulated final judgment that would include nominal monetary penalties, subject to a judge's approval.
The CFPB has indicated that continuing the case in either Chapter 11 or Chapter 7 bankruptcy filing would expedite its investigation and judgment process. In June, the CFPB filed a statement of interest supporting the conversion of the case to Chapter 7 rather than dismissing it.
The bankruptcy of Synapse has affected more than 100,000 consumers, with many filing complaints with the CFPB claiming their accounts were frozen and they have only received a fraction of their funds. A hearing on the conversion motion is scheduled for Monday.
The CFPB's subsequent work, including potentially accessing its civil penalty fund to compensate affected users, would not depend on an active bankruptcy case. The CFPB has made $3.3 billion in CPF payments to eligible consumers since 2010.
Synapse partnered with various fintech companies like Yotta, Dave, Juno, and insured banks like Evolve, Lineage Bank, American Bank, and AMG National Trust. The CFPB's investigation and potential legal action against Synapse is ongoing and reflects developments up to August 2025.
As the situation unfolds, it is essential for consumers to stay informed and seek assistance if necessary to protect their financial interests. The CFPB encourages consumers to visit its website or contact its hotline for more information and guidance.
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