'I have no money': Thousands of Americans see their savings vanish in Synapse fintech crisis

[Zorro]

For 15 years, former Texas schoolteacher Kayla Morris put every dollar she could save into a home for her growing family.

When she and her husband sold the house last year, they stowed away the proceeds, $282,153.87, in what they thought of as a safe place — an account at the savings startup Yotta held at a real bank.

Morris, like thousands of other customers, was snared in the collapse of a behind-the-scenes fintech firm called Synapse and has been locked out of her account for six months as of November. She held out hope that her money was still secure. Then she learned how much Evolve Bank & Trust, the lender where her funds were supposed to be held, was prepared to return to her.

“We were informed last Monday that Evolve was only going to pay us $500 out of that $280,000,” Morris said during a court hearing last week, her voice wavering. “It’s just devastating.”

https://finance.yahoo.com/news/no-money-thousands-americans-see-223556135.html

Deposit over a quarter million in a "savings startup" when there's a regular bank on about every street corner? A fool and their money are soon parted.

[OAITW r.2.0]

1. There is so much marketing going on on streaming networks for on line banking. Buyer beware.

I have been an Acorns user for 10 years and I use it for a liquid, higher yield investment portfolio. Put in $400.00/mo. and the returns have been reasonable.

[Igel]

2. "FDIC" is a nice sign.

At the same time, if an investment isn't insured pretty much it's 100% CYA-approved and legally required to say that so companies actually do.

A bit of financial literacy is required to use money in any more than transactions.

Sorry for her loss. But one should be cautious about where to stow a lot of cash--even "good" investors make mistakes.

[MichMan]

3. Synapse through Evolve did tell customers that their funds were FDIC insured

People invested through Synapse, and the funds were pooled and held by Evolve. The question that no one can answer right now is which entity is responsible for the missing funds, who is owed what, and what is the responsibility of the FDIC. Seems like everyone is pointing the finger towards each other right now.

Abandoned by U.S. regulators who have so far declined to act, they are left with few clear options to recoup their money.

In June, the FDIC made it clear that its insurance fund doesn’t cover the failure of nonbanks like Synapse, and that in the event of such a firm’s failure, recovering funds through the courts wasn’t guaranteed.

The next month, the Federal Reserve said that as Evolve’s primary federal regulator it would monitor the bank’s progress “in returning all customer funds” to users.

“We are responsible for working to ensure that the bank operates in a safe and sound manner and complies with applicable laws, including laws protecting consumers,” Fed general counsel Mark E. Van Der Weide said in a letter.

https://finance.yahoo.com/news/no-money-thousands-americans-see-223556135.html

[jojog]

4. Project 2025 wants to eliminate FDIC

[DENVERPOPS]

6. AND

Every other Regulatory Agency in the U.S. Government......

They want to take the U.S. back to the infamous "Gilded Age" with a new CABAL of "Robber Barrons"

[ancianita]

5. No one should ever, ever put that amount of money in any but one of the world's top three banks.

per Google AI:

The FDIC insures deposits up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category. This includes savings accounts, checking accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs).
In the event of a bank failure, the FDIC pays depositors their insured deposits in full, including principal and interest. The FDIC also collects and sells the assets of the failed bank to settle its debts.

from the FDIC:

What the FDIC does not insure:
Stock Investments.
Bond Investments.
Mutual Funds.
Crypto Assets.
Life Insurance Policies.
Annuities.
Municipal Securities.
Safe Deposit Boxes or their contents.
https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance

[MichMan]

8. So never use Credit Unions, regional banks, or big national banks ?

[wintemark]

9. NCUA

Credit unions have the same insurance protections for their "members" but it is through NCUA and not FDIC.

[MichMan]

10. The post I replied to stated to only use the three biggest global banks.

According to the list I found, they are all in China.

Pretty certain I'm not putting all my money into Chinese banks.

[ancianita]

13. True. Thanks for the info.

I'm really talking about this couple's access to the biggest banks with the most banking locations, in case they want some mobility along with safety for their nest egg. If they have an NCUA near them they woulda/shoulda/coulda checked them out, for sure.

[ancianita]

12. Credit unions, sure. I forgot about them and how good they can be. Thanks.

I don't know enough about regional or national banks to say, but global banks would be safer for the little guy.

I won't argue the future, just making a point that for us groundlings trying to build retirement nest eggs, these smaller corporate banks are the last banks anyone should trust.

I say this because, we know Powell, who Trump appointed in the first place, now potentially wanting him out though he's supposed to serve out, IIRC, the rest of his 5 year term -- but still... I wouldn't feel confident about the Federal Reserve under the reign of the trump triumvirate. Or the continued existence of the FDIC, either.

Okay, national and regional banks, yes, are part of the Federal Reserve system. So I understand your point.

Thanks for your helpful post.

[MichMan]

16. "No one should ever, ever put that amount of money in any but one of the world's top three banks."

Which are all Chinese and unlikely to be insured by the FDIC at all.

No thanks.

You of course are free to put all your money in them as you recommended.

[ancianita]

17. I mean American based banks. JP Morgan Chase is #5, some years, #3.

There are good big American banks with lots of locations that allow mobility, so that one isn't tied to one area in a country this big. Come ON, you don't have to be so letter of the law about it.

[soandso]

11. Unless you're rich with influence

Then exceptions can be arranged:

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation announced Sunday that they will make additional funding available to ensure all Silicon Valley Bank deposits, both insured and uninsured, will be paid in full.

"After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary [Janet] Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors," the said in a joint statement. "Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer."

The Fed also announced it will make additional funding available to "to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors."

Silicon Valley Bank, the 16th largest bank in the country, failed on Friday and was taken over by the FDIC, after a run on the bank Wednesday and customers withdrew $42 billion of deposits by the end of Thursday. SVB mostly served technology workers and startups, including some of Silicon Valley's biggest names, such as Roku.

https://abcnews.go.com/Business/silicon-valley-bank-collapse-treasury-fed-fdic-announce/story?id=97807268

That all had something to with Sam Bankman Fried and the scam he ran.

[ancianita]

15. I hear you. Thanks for the information. Just remember, overall, that

this Bessent guy is no Janet Yellen, and folks should keep an eye on what he does with international sanctions against Putin and other global terrorists that Yellen instituted under Biden.

What Yellen has done has helped the overall safety of the little guys, because she's positively impacted our national security. Under trump we'll have to be careful about the state of currency and banking. Cash can buy groceries more easily than using bitcoin atms. I'm not a fan of a currency that Krugman says, after 20 years, is still too unstable -- being fraught with corruption, theft and little guy wipeouts -- to be trusted.
https://news.bitcoin.com/nobel-laureate-paul-krugman-quits-predicting-bitcoins-demise-btc-survive-indefinitely/

[dalton99a]

7. You don't give your money to a company named Yotta

https://en.wikipedia.org/wiki/Yotta_Savings

[hatrack]

14. "What Happened??!! I Thought Whoopsie-Daisy Big Money Hut Was Totes Legit!!"