Comment by marginalien | Hacker News Reader

Comment by marginalien | Hacker News Reader

Apparently, the problem is not that the money would be gone but that it’s just somewhere else because only BaaS middleman Synapse has access to the actual reconciliation how these funds distribute across individual fintech end users. According to the article, this is because of „very large bulk transfers“ which did not identify ultimate creditors. I am still puzzled how that can be. If end users top up their digital wallets, they typically send money by means of a real bank transfer to a client money account at a real bank. So at least at this initial point in time it was clear to the underlying banks who owned the money. Apparently, end users then spent money through user-facing fintech apps (I.e., „Yotta“) which is where the problem must have started as reconciliation of funds sat with Synapse only but not with the underlying banks…?

It would be great if someone with more background could comment to clarify as this case is potentially relevant to many other fintech / banking-as-a-service offerings out there.

Ok so as I understand it the flow was something like:

1. Individuals deposited to Yotta 2. Yotta sent deposited funds to Evolve Bank via Synapse 3. Evolve Bank received "lump" deposits with no record of whose money was whose

So somewhere between Yotta and Evolve Bank the money was pooled and records of whose money was whose was not forwarded. (Note that the FDIC now requires that the receiving back keep a record of whose money they're receiving because of this case.)

Synapse went bankrupt. Supposedly Synapse's estate can figure out where everyone's money went, but they have no money to hire an auditor. Meanwhile Evolve Bank says they didn't receive all of the funds so there's something like 90 million that is "lost".

Finally, the FDIC ruled that individuals had business relationships with Yotta, and those business relationships are not insured by FDIC, so any recovery of funds from Yotta would need to be pursued in Civil Court.

So all I need to get away with a $90 million Ponzi scheme is declare bankruptcy and then claim I can't afford an accountant?

Bernie Madoff is rolling in his grave, his plan was just to die before getting caught.

No criminal charges have been filed yet because it's not yet clear where the money went or who could have stolen it. The Madoff case didn't have this element of mystery because there weren't multiple layers of intermediaries to muddle things, and because the case was blown open directly by Madoff's confession.

Law enforcement is eventually going to figure out the answers to these questions, since they are knowable if you dig deep enough; it's just that this takes time. And then I would bet there will be criminal charges.

I don't have more context than what's in the article but what it sounds like is they've lost access to the database that says $2000 from this pile of $10MM belong to John Doe, because the company that hired the devs who understood this stuff is bankrupt, and the involved parties can't seem to reach an arrangement to bring in a cleanup crew. I don't think any money is actually missing.

Ultimately a modern bank is just a software system pushing around the proverbial proto between some databases and other financial software systems.

I’m willing to wager that there is money actually missing.

It's very difficult to make money disappear in the US system without getting caught eventually.

Yes but some of those databases are highly regulated and some are not, and the distinction between those (and in some cases deceptive advertising around it) is the crux of the issue here

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