Does this trigger the FDIC to step in? Was Synapse FDIC insured or just the underlying banks? Or is synapse "shadow banking" gone wrong?
I don't know why this isnt bigger news, and I dont get why there aren't clear answers.
I don't know why this isnt bigger news, and I dont get why there aren't clear answers.
Since synapse isn’t a bank, technically there hasn’t been a bank failure so fdic doesn’t step in.
There’s over 128BB in the fdic fund so we can easily bail these customers out. But they should figure out if it’s fraud or what not.
If FDIC is going to step in, it's clear regulation needs to be created that saying "We are FDIC Insured" is only allowed if your money directly transfers to bank account in your name.
How the hell do you get a checking account and a debit card from "not a bank"?
What really frustrates me is that many financial products state that pass through FDIC insurance may apply, sometimes listing various pretty arbitrary-sounding requirements for that.
As I see it, either a fintech makes sure these preconditions apply for all customers, or they shouldn’t get to mention FDIC insurance at all.
That's $128 Billion.
FDIC can't get involved because they can't even tell who rightfully has what money where. Lol
Does this condition trigger the DOJ?
Stolen obviously means criminal charges.
Wouldn’t FDIC insurance only cover $250K in each bank account if the bank went under? In this case it’s the service people used to put money (or the service the service used) into those accounts that’s gone bust with poor or no record of where people’s money has gone.
> Or is synapse "shadow banking" gone wrong?
Yes! Remembering where and how much customer money has gone is regulated banking 101
Mercury is the provider I know who does this (in partnership with Evolve, as the link indicates) but I think there are others as well.
The limit isn't per account; from the FDIC website:
> The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
A properly notated pooled account should confer FDIC insurance to the underlying depositors. But if the intermediary doesn't properly notate the underlying accounts at the bank, or doesn't send all of your money to the underlying bank, FDIC insurance doesn't cover that. And you won't have statements from the insured bank to verify that the money is there either.
There's a FDIC document specifically about these kinds of pooled accounts: https://www.fdic.gov/deposit/diguidebankers/documents/fiduci...
1. Sure, you can call what the FDIC did with respect to SVB an exception, but it wasn't without precedent, and there was a defined process for dealing with situations that could lead to "systemic disruption". That's very different from some sort of bailout for Synapse, where the FDIC never had a relationship with them in the first place. Furthermore, while it's fine to argue about moral hazard with the SVB bailout, no taxpayer funds were used here, and my understanding is that nearly all (if not all) of the money to make depositors whole came from a forced sale of SVB assets. Any balance came from FDIC insurance premiums from other banks.
2. "But I don’t think Synapse customers were SV startups owned by VCs" - that part is just wrong. Lots of Synapse's customers, i.e. the companies who purchased access to Synapse's APIs, most definitely were startups with big VC investors.