Synapse was a fintech company that connected other fintech companies like Yotta to banks. When customers deposited money with Yotta it was passed to Synapse who


deposited it in a bank which held the money and was FDIC insured. Synapse’s key role was keeping track of whose money was where. Yotta just needed to design a gamified


front-end that people liked using and organise the sweepstake. Essentially, Synapse kept the records and the banks held the money. Some of the fintechs like Yotta promised


enhanced FDIC insurance of up to 500,000 dollars, explaining that the funds would be deposited across a network of FDIC-insured banks. Synapse described themselves as a


Banking-As-A-Serivce provider, where they provided the back-end software for around 100 different fintechs with millions of customers, depositing the money at four different


partner banks. Te fintechs and the banks all relied on Synapse to track the transactions and account balances and determine how much money was in each customer account at all times. Rather than licensing their software, Synapse struck deals with both the banks and the fintech apps; they handled customer onboarding, KYC and anti-money laundering checks, record keeping and risk mangement and all other compliance functions. Synapse credit four ‘benefit of'’accounts at four partner banks where the


fintech customers money was deposited in interest-bearing pooled accounts. Synapse being a tech firm and not a bank was mostly free of regulatory oversight. In April of 2024, Synapse filed for a chaotic bankruptcy in which the banks lost access to all customer account and transaction data that was maintained by Synapse and found


themselves unable to work out who's money was whose. Te accounts were frozen as a result. And due to the fact that no bank had actually failed in this scenario, none of the Yotta accounts could benefit from FDIC insurance.


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