From CNBC: 2024-07-11 10:53:04

Thousands of Americans may finally regain access to their frozen funds in fintech accounts locked for the past two months. Progress has been made by banks investigating the collapse of intermediary Synapse, hiring a former engineer to piece together account data, potentially releasing funds in weeks. Regulators are pressuring banks involved to release funds after over 100,000 customers were locked out of their accounts starting in May.

Evolve Bank & Trust and Lineage Bank have made headway in unlocking customer data following the collapse of Synapse. Federal Reserve Chair Jerome Powell is urging Evolve to help make money available to depositors. The optimism comes after weeks of apparent gridlock in a California bankruptcy court and challenges associated with reconciling accounts and identifying owed funds.

The episode exposes weaknesses in small banks managing unregulated partners like Synapse, founded in 2014 by Sankaet Pathak. Regulators have reprimanded banks in the “banking-as-a-service” sector for failures tied to their programs. There is uncertainty surrounding how the main banks involved and Synapse will handle a likely shortfall of funds, with up to $96 million owed to customers missing. A response from Evolve to FINRA confirmed funds from Yotta left the bank in late October 2023, amid contradictory statements with Synapse.

Read more: Banks get closer to releasing deposits of stranded customers