Banks have to follow strict rules to account for where all the money goes. But the way fintechs work, they usually just have one or a couple underlying "FBO" accounts where all the pooled money is held, but then the fintech builds a ledger on top of this (and, as the article points out, to varying levels of engineering competence) to track each individual customer's balance within this big pool of money. In Synapse's case, their ledger said the total amount of all of their individual customer balances ended up being much more than the actual funds held in the underlying FBO accounts. Lots of folks are assuming fraud but I'm willing to put money that it was just a shitty, buggy ledger.
FWIW, after seeing "how the sausage is made", I would never put money into a fintech depository account. Use a real bank. Fintechs also often put out the fake promise that deposits are FDIC insured, but this only protects you if the underlying bank goes belly up, not if the fintech loses track of your money.
See https://www.forbes.com/sites/zennonkapron/2024/11/08/what-th...