Mercury's Claims Are "Knowingly Meritless," Synapse CEO Says
Mercury's Claims Are "Knowingly Meritless," Synapse CEO Says
Synapse Plans Countersuit Against Mercury, Formerly Its Largest Client
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Mercury's Claims Are "Knowingly Meritless," Synapse CEO Says
Earlier this month, business banking platform Mercury filed an arbitration claim and an emergency lawsuit seeking to freeze banking-as-a-service platform Synapse’s assets, claiming it is owed as much as $30 million.
In its suit, Mercury argues this is necessary in order to preserve assets for a potential win in its arbitration case in light of what it describes as “Synapse’s ongoing financial collapse.”
Mercury’s arbitration claim is non-public and the public version of its suit seeking a right to attach and writ of attachment is heavily redacted, making it impossible to assess the veracity of its claims.
The court denied Mercury’s request for an emergency temporary protective order and scheduled a hearing on its request for a writ of attachment for January 24, 2024.
Now, Synapse’s CEO Sankaet Pathak is firing back, arguing in a statement that Mercury’s claims are “knowingly meritless” and promising that a countersuit is forthcoming.
In his response, Synapse’s Pathak says he believes Mercury strategically redacted the public version of its filing, in order to hide the weakness of its claims while painting Synapse in a negative light.
Pathak disputes the accuracy of Mercury’s claims, including that Synapse is in “financial freefall,” while selectively revealing portions that had been redacted, which seem to suggest the disagreement is a straightforward contact dispute.
Pathak’s response goes on to rebut Mercury’s core claims: that Synapse was obligated to increase its “deposit rebate” payments to Mercury as interest rates rose, but did not; and that Synapse should have calculated Mercury’s share of interchange revenue based on “gross” rather than “net” volume.
In support of his position, Pathak includes what appear to be snippets of Synapse agreements that describe Synapse as having the right, but not the obligation, to increase or decrease “deposit rebates” and that revenue share is calculated on “net” interchange — though, from the limited portions of the agreements included, it is not possible to confirm if these are the versions of the documents that were executed between Mercury and Synapse.
Pathak concludes by pointing out alleged operational challenges Mercury has had since migrating off of Synapse and integrating directly with Synapse’s former bank partner, Evolve Bank & Trust. He cites both complaints addressed to him personally as well as those voiced publicly on social media:
What’s next in the legal dispute between these two fintechs (both of which are backed by Andreessen Horowitz, interestingly enough)?
The court hearing for Mercury’s request for a writ of attachment is scheduled for late January, while the timing and claims of Synapse’s promised countersuit are currently unknown.
Have tips about what’s happening at Synapse, Mercury, or elsewhere in banking-as-a-service and fintech? Reach me securely on messaging app Signal at +1-316-512-1571 or by email at jason@fintechbusinessweekly.com
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