(Bloomberg) -- The remainder of the roughly $200 million of consumer funds frozen during the bankruptcy of banking-as-a-service provider Synapse Financial Technologies Inc. should be returned to customers in December, according to court-appointed trustee Jelena McWilliams.
The final disbursement of funds will mark the end of a more than six-month ordeal that has prevented consumers from accessing money held at fintech firms including Yotta Savings, Copper Banking and Juno Finance. Synapse’s primary banking partner, Evolve Bank & Trust, reports that it has completed efforts to reconcile its ledgers with those of bankrupt Synapse, according to a trustee status report. The bank has a website with instructions for fintech customers looking to regain access to their funds.
In some cases, affected fintechs displayed the Federal Deposit Insurance Corp. logo on their websites. When Synapse’s bankruptcy disrupted access to their money, consumers were surprised to discover that their funds would not be made immediately available to them since technology provider Synapse, and not its bank partners, had failed.
“One of the seminal issues for the FDIC insurance is that consumers are under the understanding that FDIC insurance applies if their money is missing,” McWilliams, who served as FDIC chair, said during a Bloomberg TV interview Wednesday. “The FDIC insurance applies if a bank fails and that is not something clear to the general public.”
The Synapse trustee’s latest report, filed on Tuesday, continued to note the potential for a shortfall between the amount of money available for return to customers and what is recorded on Synapse’s ledgers.
“There is no update to the aggregate $65 million to $95 million estimated shortfall,” the report says.
--With assistance from Claire Ballentine and Sonali Basak.
(Updates with quote from trustee’s report in last paragraph. A previous version of this story corrected the last paragraph to say a potential shortfall remains between the amount of money available for return to customers and what is recorded on Synapse’s ledgers.)
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