Infighting among fintech players has caused TabaPay to ‘pull out’ from buying bankrupt Synapse
Reading Time: 2 minutesThat closing condition is that Evolve Bank & Trust must fully fund its FBO accounts and has thus far failed to do so, according to Pathak. FBO stands for ‘for benefit of account,’ and is defined as ‘a bank or investment account that is set up to receive funds on behalf of a third party or beneficiary.’
Synapse ran into difficulties last year after having served as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to end their respective relationships with Synapse and work directly with each other, Evolve and Synapse were reportedly at odds with each other as the relationship was winding down. (Evolve is not to be confused with another Mercury partner, Choice Bank, that the FDIC is looking into over compliance with how it allowed Mercury accounts to be opened up overseas.)
In a Medium post, Pathak alleges that when Mercury and Evolve ended their partnership with Synapse, Mercury moved $49.6 million dollars more out of the Synapse-affiliated accounts than Synapse believes it should have and has not reconciled the overdraw.
In October, Mercury publicly said that the transition away from Synapse was complete and ‘reconciled.’
‘Our hope with open sourcing this information is that there will be a public outcry (at least from our customers) that will motivate Evolve and/or Mercury to swiftly resolve this issue instead of hoping that this problem would go away,’ Pathak wrote. ‘This resolution is material to Synapse and our ability to be able to close the TabaPay transaction. Our understanding is that Taba would finish the acquisition if Evolve met their closing condition of funding their accounts.’
Mercury could not be immediately reached for comment.
The deal was pending bankruptcy court approval.
The $9.7 million purchase price was significantly lower than the over $50 million in venture capital that Synapse had raised from investors such as Andreessen Horowitz, Trinity Ventures and Core Innovation Capital over time.
Founded in 2017, Mountain View-based TabaPay is an instant money movement platform that SoftBank backed in a 2022 round of an undisclosed sum. It is not clear how much venture capital it has raised.
San Francisco-based Synapse, which operated a platform enabling banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and Pathak.
Reference: https://techcrunch.com/2024/05/09/tabapay-ends-plans-synapse-mercury-evolve/
Ref: techcrunch
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