Evolve Found More End User Funds, Won’t Say How Much
FDIC Withdraws Four Rules, Delays Compliance Date For Updated Signage Rule
Hey all, Jason here.
This week’s newsletter is coming to you slightly behind schedule (and a little shorter than usual), as it has been an exceptionally hectic travel week. I was in the Salt Lake area for LoanPro’s Customer Advisory Board, and I’m currently in Las Vegas, for Fintech Meetup.
There are a slew of exciting events scheduled over the next couple days — too many to list here — but, if you’re in Vegas, hopefully we’ll cross paths at some point!
If you enjoy reading this newsletter each Sunday and find value in it, please consider supporting me (and finhealth non-profits!) by signing up for a paid subscription. It wouldn’t be possible to do what I do without the support of readers like you!Evolve Found More End User Funds, Won’t Say How Much
In an open letter Evolve published last week addressed to Synapse “end users” (depositors), the bank said it would be making additional disbursements to a subset of end users, writing:
Evolve continues to engage Ankura to assist the bank with ongoing data analysis and validation. In connection with data- sharing activities, Ankura confirmed additional institution-to-institution cash management transactions involving End Users’ funds held at Evolve. As a result, Evolve will be disbursing more funds to a subset of End Users on or about March 6, 2025, via PayPal and checks sent via the U.S. Postal Service.
A spokesperson for Evolve refused to confirm the amount of additional funds that had been identified to be returned to its depositors.
While this is undoubtedly good news and provides a glimmer of hope to end users, it calls into question Evolve’s previous reconciliation work, which it has repeatedly represented as being “complete.”
Asked what enabled Evolve to locate and return these additional funds now, an Evolve spokesperson wrote (emphasis in the original):
While we have not received access to the complete data needed for a comprehensive, ecosystem-wide reconciliation, Evolve has continued to engage Ankura to assist the bank with data analysis and validation. During data-sharing discussions between Evolve and the other banks, Ankura confirmed additional institution-to-institution cash management transactions involving End Users’ funds that Evolve held. As a result, Evolve will be disbursing more funds to End Users on or around March 6, 2025, via PayPal and March 10, 2025, checks will be sent via the U.S. Postal Service.
The Evolve spokesperson did not directly respond to a question about why its depositors should trust that these calculations are correct, when the prior ones seemingly were not.
Evolve’s open letter continues to cast blame on Synapse, a third party service provider Evolve worked with for approximately a decade, writing (emphasis added):
[W]e continue to work with the Synapse ecosystem banks to obtain the transaction data needed for Ankura to undertake the analysis to determine where End User funds are being held—using reliable data, not the discredited Synapse ledger…
Synapse created an infrastructure in which no one bank, fintech, or End User had all of the data, and Synapse’s own records were inaccurate.
And attempts to direct blame at the other Synapse ecosystem banks — AMG, Lineage, and American Bank — writing:
Evolve continues to make forward progress with our portion of reconciliation and payments to affected End Users. Unfortunately, none of the Synapse ecosystem banks—AMG, Lineage, and American—have agreed to the data sharing necessary to complete the analysis and determine who holds End User funds.
However, both AMG and Lineage pushed back on this characterization in separate statements shared with Fintech Business Weekly.
A Lineage Bank spokesperson shared the following written statement (emphasis added):
Lineage Bank is disappointed that Evolve Bank & Trust continues to frame the issues surrounding the Synapse bankruptcy in a misleading way, pretending the germane issue is “where each End User’s funds are being held” within the Synapse ecosystem. Lineage and the other banks have publicly disclosed to the bankruptcy trustee and the court exactly what they have done with the Synapse-linked funds they held: they have paid the overwhelming majority of the funds out to end users according to Synapses’ trial balances, as confirmed by the banks’ own independent reconciliations. The small remaining balances have been disclosed and are still in the process of being distributed to their rightful owners.
The critical question that remains is “why do the Synapse-generated trial balances exceed the collective balance of Synapse-related funds held at the banks?” Lineage will continue cooperating with the Synapse bankruptcy trustee and interested parties in the pending court proceedings to understand this critical issue.
Lineage Bank has consistently demonstrated transparency, diligence, and accountability, returning approximately 97% of the funds it held to affected Synapse customers since Synapse collapsed. Now that the reconciliation and distribution process is coming to an end, any further record-sharing between and among the banks will occur in accordance with the rules of civil procedure and the court’s orders in the pending court proceedings.
And AMG’s CEO, Sheryl Bollinger, shared the following written statement (emphasis added):
AMG sincerely hopes that Ankura can help Evolve find additional funds to pay to end-users, and AMG always has been willing to share information that might help Evolve reconcile its accounts to Synapse’s trial balance. However, Evolve has not been willing to explain why it needs the information it has requested or how it intends to use the information. Evolve also has been unwilling to provide AMG with the information AMG has requested or even the basic information the bankruptcy trustee requested be shared among the banks.
Banks are subject to strict confidentiality requirements, and AMG cannot share its customer data just because another bank requests it. We need to know in detail how the data is relevant to the requesting bank’s needs and will be used to help resolve an issue with the customer’s accounts. Evolve has been unwilling to provide that.
AMG believes that Evolve is being disingenuous in saying it wants to “complete the reconciliation for the other institutions.” AMG knows exactly how much money it received into Synapse Brokerage’s accounts held at AMG and exactly how much it has paid out in accordance with Synapse Brokerage’s instructions. AMG does not need Evolve or Ankura to complete a reconciliation for AMG.
Also, in May 2024, AMG provided Evolve a copy of the trial balance AMG received from Synapse Brokerage, which sets forth to whom AMG is contractually required to make payments and in what amounts. So since then, Evolve has known where those funds were being held. As previously reported by the Synapse bankruptcy trustee in public reports, AMG has paid out over 99% of those funds and continues to pay out the remainder as it locates the remaining recipients.
Finally, AMG and Evolve have shared with each other the inter-bank transactions that occurred between them, and those records agree. That information is at the "bulk" level and does not include end user detail. AMG remains willing to mutually exchange additional information with Evolve as is legally required or reasonably necessary to help Evolve reconcile its records.
American Bank declined to provide any comment for publication.
FDIC Withdraws Four Proposed Rules
Last week, the FDIC withdrew four proposed rules that had been introduced but not finalized under the prior administration.
The most notable is the withdrawal of the proposed rule that would have functionally reversed 2020’s changes to the definitions of what qualifies as a “brokered deposit.” Whether a deposit is treated as “brokered” or not can impact a bank’s deposit insurance assessment, and banks that are less than well capitalized need a waiver or may be prohibited from holding brokered deposits.
The FDIC also withdrew proposed rules covering corporate governance of banks with more than $10 billion in assets, regulations implementing the Change in Bank Control Act, and a rule regarding incentive-based compensation arrangements.
The statement noting the withdrawal of the four rules concluded by saying:
The FDIC is withdrawing these Notices of Proposed Rulemaking because it no longer intends to issue final rules with respect to these proposals. If the FDIC pursues regulatory action on these matters in the future, it will do so by publishing new proposed rules or other issuances consistent with the requirements of the Administrative Procedure Act.
The FDIC also delayed the compliance date for its updated signage requirements. The measure, finalized in December 2023, was scheduled to take effect on May 1, 2025. The updated signage rule will now take effect on March 1, 2026.
Finally, the FDIC rescinded its Statement of Policy on Bank Merger Transactions published in 2024, reinstating its prior Statement of Policy on Bank Merger Transactions.
The FDIC argued the 2024 statement had “added considerable uncertainty to the merger application process,” and that the rollback to its prior statement “would be an interim measure while the agency conducts a broader reevaluation of its bank merger review process.”
Other Good Reads
The Biggest Threat to Consumers’ Financial Health (Fintech Takes)
The AI Problem: Why Finance Can't Have Nice Things (Yet) (Fintech Brainfood)
When the Household Pie Shrinks, Who Gets Their Slice? (Liberty Street Economics)
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