Yotta Savings, a fintech startup, has revealed that 85,000 customer accounts, holding a combined $112 million, have been locked out for three weeks due to a dispute between its banking partners, Synapse and Evolve Bank & Trust.
CEO Adam Moelis Speaks Out
“We never imagined a scenario like this could play out and that no regulator would step in and help,” said Adam Moelis, CEO and co-founder of Yotta, in an exclusive interview with CNBC. “The stories are heartbreaking. We’ve had customers reach out to us, saying they can’t pay their bills, they can’t buy food, they can’t afford surgery. It’s a complete disaster.”
The Crisis Unfolds
The crisis began on May 11, when a dispute between Synapse and Evolve Bank & Trust led to the lockup of accounts at Yotta and at least two dozen other startups. Synapse, a fintech middleman, declared bankruptcy earlier this year after several key clients abandoned the firm amid disagreements over the tracking of customer funds.
Regulatory Failure
Moelis believes that the relatively limited scope of the issue and the fact that most of those affected aren’t wealthy have given regulators clearance to let the situation play out. “To me, if this was happening at a larger scale, I think regulators would have done something by now,” he said. “We’ve got real, everyday Americans that aren’t necessarily wealthy and don’t have the ability to lobby that are being impacted.”
Federal Reserve and FDIC Decline to Comment
The Federal Reserve and the Federal Deposit Insurance Corp. have declined to comment on the issue, pointing to efforts they’ve made to encourage banks to manage the risks of using fintech partners.
Hope on the Horizon
Developments in the California bankruptcy court overseeing the Synapse failure give Moelis hope that at least some relief may be coming. Last week, former FDIC Chair Jelena McWilliams was named trustee over Synapse, tasked with developing a plan to maintain Synapse systems and craft a solution “that allows funds to be returned to end users, to the rightful owners of those funds, as soon as humanly possible.”
A Call to Action
As the crisis continues to unfold, Moelis urges regulators to take action. “We know how much money came into the system, and we are certain that that’s the correct number. The money doesn’t just disappear; it has to be somewhere. We need regulators to step in and help us resolve this situation.”
The Future of Fintech
The ongoing mess has exposed the risks in a corner of fintech that grew in prominence during a boom in venture investment. As regulators increase scrutiny of the space, the future of fintech hangs in the balance
