Important Update Regarding Synapse ACH Payment Processing Services
Background on Lineage Bank and Synapse
Synapse Financial Technologies, Inc. (“Synapse”) was a financial technology company that provided banking-as-a-service infrastructure to fintech platform companies. Synapse filed bankruptcy on April 22, 2024, and ceased operations shortly thereafter. A Chapter 11 bankruptcy trustee was appointed over Synapse on May 24, 2024. Lineage Bank is currently holding approximately $6 million in funds belonging to end users of Synapse and its subsidiary, Synapse Brokerage, LLC. Thus far, Lineage Bank has successfully disbursed approximately $56 million to over 10,000 users affected by Synapse’s bankruptcy.
Lineage Bank served as a payment processor for Synapse prior to its financial collapse, facilitating Synapse’s financial services for its fintech clients and their users. This means that Lineage processed transfers based on Synapse’s instructions, moving funds as directed by Synapse for incoming and outgoing payments. Lineage Bank did not serve as a “program bank” for Synapse Brokerage or other Synapse subsidiaries, nor did it, aside from one Synapse-linked fintech, manage individual accounts or establish direct banking relationships with Synapse’s platforms and end-users. Lineage terminated its agreement with Synapse prior to Synapse’s voluntary bankruptcy filing.
Lineage is actively cooperating with the bankruptcy trustee for Synapse, the bankruptcy court, Synapse’s fintech customers and Synapse’s partner banks to ensure that funds are returned safely and accurately to their rightful owners. To date, Lineage has returned over 90% of Synapse end user balances, and our efforts to disburse remaining balances to eligible users are ongoing.
Understanding Important Terms
A Demand Deposit Agreement, or DDA, is a formal agreement between a bank and a customer that establishes a deposit account. This type of account typically allows the customer to “demand” or access their funds.
Aside from one specific Synapse-linked fintech, which has already been disbursed, Lineage Bank did not provide DDAs to Synapse’s end users. This means that most Synapse users did not have a direct deposit agreement with Lineage Bank. Instead, these users’ funds were managed through agreements between Synapse and its other partner bank(s), with Lineage serving as the payment processor.
A Trial Balance is an internal accounting report that lists all balances associated with accounts in a particular system or ledger. In this context, Synapse’s Trial Balance was the accounting document maintained by Synapse that tracked end user account balances across all banks in Synapse’s network of partner banks.
The Reconciliation Process
Following Synapse’s bankruptcy filing, Lineage worked closely with the Synapse bankruptcy trustee to obtain records that allowed the bank to verify the Synapse Trial Balance. Using the records Synapse provided, Lineage matched the funds it held with users that Synapse’s records showed as account holders. This allowed us to generate statements confirming balances for well over 10,000 users, who have since received their funds. In some instances, Lineage identified discrepancies in Synapse’s records and took steps to correct them to ensure users received the correct balance.
Lineage Bank’s Priority
Lineage has and continues to work tirelessly every day to restore Synapse-linked funds to their rightful owners in the correct amounts. Lineage understands the urgency and responsibility that has been placed upon the institution to do everything in its power to calculate accurate balances and distribute the funds.
Understanding Your Demand Deposit Agreement
For impacted end users, it’s essential to understand that Lineage Bank, aside from one Synapse-linked fintech program, did not offer Demand Deposit Agreements (DDAs) or provide deposit accounts to Synapse users. A Demand Deposit Agreement is a formal agreement between a bank and its customer, allowing the customer rights to access or “demand” their funds. Impacted users should refer to their Demand Deposit Agreements and other relevant documents provided by their fintech platform to understand their rights.
Protection of Your Personal Information
We take our responsibility to protect your information very seriously. We use commercially reasonable physical, technical, and procedural safeguards to secure your information from unauthorized use, access, alteration, or disclosure.
How Funds Are Returned
Lineage has collaborated with third-party vendors Eisen and Checkbook.io to streamline and expedite the process of returning funds to end-users. You may find out more information about Eisen’s funds disbursement process at Automated Disbursement | Stay Compliant with Eisen and about Checkbook.io’s digital check solutions at Push payments simplified | Checkbook.
Media contact: Clint Brewer
clintbrewer@imperiumstrategiesllc.com