Synapse still can't find its money(bloomberg.com) |
Synapse still can't find its money(bloomberg.com) |
P.S.: I also find it amusing that they stored+hosted their financial ledger using MongoDB. Not that you can't commit massive financial mismanagement with any tool, but I was not a fan of the "NoSQL" evangelism of the 2010s.
Embezzlement is finally web scale! [1]
(The problem here is not nosql, I believe you can do reliable accounting with ScyllaDB and Cassandra as long as you design things correctly. Basically only ever allow append/add but never allow update/delete. I’m not sure if this is true of MongoDB.)
https://stackoverflow.com/questions/16833100/why-does-the-mo...
when the k8s+mongodb "non-legacy" tech stack implodes at least I have a physical document the bank produced that the court can understand
Evolve Bank says "we have determined that we are not holding your funds and you will not be receiving a payment from Evolve" (reconciliationbyevolve.com)
Yotta customer support says "According to the Synapse Trial Balance Report, your funds are with Evolve Bank & Trust".
It doesn't appear I'll ever be getting that money back. It's not enough that I'll hurt, but it'll make me think twice about trusting a non-bank fintech startup and their "FDIC insured" claims.
This is what Yotta's website looked like in 2020, where "FDIC insured" is the most prominent part of their pitch, and one of the homepage blocks is titled "You can’t lose": https://web.archive.org/web/20200630201639/https://www.withy...
Turns out, we could lose.
IANAL.
>As a result, the partner banks and fintechs were all reliant on Synapse to determine how much each customer was owed at all times.
I don’t understand how a partner bank would… want to do this?
As a bank knowing your numbers and who you owe seems like a fundamental function, why would you leave that to some middle man and some strange portal?
How do you know they don’t just suddenly say you owe more than you expect?
It sounds like a big risk for a bank….
But a few months before the bankruptcy, Evolve pushed Synapse to move the money into non-FDIC insured brokerage accounts. As far as I can tell, this was:
- a way to move a hole in the balance sheet from an FDIC insured to an uninsured place
- completely illegal, insofar as the only user consent was a manual opt-out, and some users weren't even sent emails about the change.
Where can I read more?
Otherwise, FDIC insurance wouldn’t matter here, no?
(Also presumably if you have a bunch of money you did get it somehow…)
Just like they bailed out the totally average definitely not rich people/corporations who got wiped by SVB collapsing.
Right guys? Right?
If Synapse (and apparently their partner Evolve) had been moderately competent at the job they set out to do, this could have been resolved a while ago. Instead the founder of Synapse is already off to a new venture and doesn't care about the people he screwed over, though I'm sure he feels bad when asked about it. Keep failing up.
Given that the depositors still have active DDA agreements with Evolve, even if they sent the money elsewhere, they still have a responsibility to provide it.
Since the government can clearly point out that these companies were not banks they can just say, "look at these idiots who didn't put their money in a bank" and they have solidified confidence in the banking system EVEN MORE
> Synapse still can't find its money (bloomberg.com) 28 points by ekpyrotic 2 hours ago | unvote | flag | hide | past | favorite | 43 comments
I did find two other stories:
> 154. Americans see their savings vanish in Synapse fintech crisis (cnbc.com) 246 points by hunter2_ 2 days ago | flag | hide | 237 comments
> 163. Synapse debacle cost some users their life savings (axios.com) 18 points by toomuchtodo 4 hours ago | flag | hide | 10 comments
It seems they should be able to sue Evolve (the bank), given that they money is there, and there's proof that the money's there.
IE, the risk of 3x damages should be enough to scare the bank into paying out.
For those who missed the previous story and discussion 3 days ago:
My conclusion is that all aggregators are bad. Economies of scale are bad.AI is bad. Anything that devalues humans is bad.
Everything has just become bad.
Reminds me of our blooming awareness of environmental pollution in the 70s.
Except instead of it being obvious, this 'financial pollution' is insidious, invisible.
Until small pockets of people are crippled. And that is why it persists-because enough people are spared this time and the inertia of the majority prevents action. Next month it will be another corruption exposed. Silicon valley bank, enron, Lehman, Salomon ....It just keeps going.
On the contrary, the banks aren't on the hook here! If they have a clear answer for "Yes, this customer's money is with you", then they pay. If not, they sit on the funds until some court orders them to do something with them.
The banks are winning big time here. It's their customers who eat the risk.
Ultimately the source of the loss is going to turn out to be some fraud at Synapse that caused their bankruptcy, but it seems like no one has details on that yet. But until then, the banks are sitting on unowned/untraceable free cash. They're loving this deal.
Contrast that to if the same sum was divided across thousands of individual accounts. Each would involve a certain amount of regulatory reporting, identity proof, pestering people to pick a beneficiary, monthly statements, etc. In addition there would need to be some way for Synapse to do deposits/withdrawals on the owner's behalf, and more of the sum would be FDIC insured meaning more money would be going out to the FDIC in insurance premiums.
I am neither a lawyer nor an accountant, this is just my understanding of the article.
If the bank screwed up this notification process then Synapse didn't necessarily know about it until the customers started complaining.
The notification process was some janky thing involving text files, cron and sftp and frequently failed. Sometimes it didn't work at all (which Synapse would spot) but sometimes it just omitted loads of transaction records.
And it gets worse from there with the bank allegedly pulling various shenanigans and Synapse being blissfully unaware.
I don't see how you can run a finance business when you have no oversight or control over what's happening.
https://lex.substack.com/p/podcast-what-really-happened-at-s...
Yotta is who the people gave their money to. Yotta then used Synapse (which went bankrupt) to actually deposit the money into not-per-user accounts at 4 different banks. As-in, if you had an account with Yotta your money would be co-mingled with thousands+ other individuals into a singular Evolve account.
Evolve has no proof that your money is within the account Synapse held with them. As-in your money could be at one of the 3 other banks.
Yotta is the one being irresponsible for not keeping track of how Synapse split the funds. (Although arguable Evolve shouldn't keep co-mingled funds since that sounds like a KYC violation).
--
This is why not only does your broker not hold your stocks for you, they also tell the holding company who owns them.
Yotta is speed running the financial system's previous failures.
The theme of the 21st century so far seems to have been “speed running the 20th.”
Are you sure about that?
I believe modern common practice in the US and many other countries is for the stock to be held by the depository in the brokerage name (which is referred to as "street name" ownership), and only the brokerage to have customer-level records.
Sounds like this would apply to other non-banks like Mercury.
I've held a (trivial) business account at Mercury since before Synapse collapsed. Mercury has never attempted to notify me about missing customer funds, potential customer losses, or the lawsuit stemming from the collapse of their banking partner.
debt is a great thing as long as you make money from that debt (you don’t pay taxes on the debt either) :)
I didn't say otherwise. But Evolve doesn't know what money belongs to what individual customer, Synapse maintained that part of the ledger (poorly). So even though Evolve has the cash (it appears), they can't distribute it to you because they don't know how much is yours, and Synapse was such a cluster that they failed at their primary job.
Alas, for many people the "workaround" is to put their credentials into a third-party service, and the fact that such things exist make me think I'm taking crazy-pills. [0]
> That doesn't mean the investor doesn't own the securities it bought. It's just a formality. As part of the process, the broker will assign all ownership rights to the investor by registering the client as the beneficial owner.
There was a quip about this in one of the moneystuff or bitsaboutmoney but not too sure which one.
Legal ownership is what makes your claims worth anything in a court of law, and protects them against those of other creditors, but without proper bookkeeping, you have no evidence a court could even consider.
The point is it’d be hard to loose data with Scylla as long as your only ever appending to the physical tables. I don’t know if MongoDB has this same attribute.
Things can go wrong on many layers above and below the database, so the property you describe seems like an implementation detail of one particular approach, not something fundamentally necessary for sound bookkeeping.
Are you saying it’s just as good to do this in the application layer? I respect that’s a possible option. Not sure I agree it’s a good option.
What the hell…
I’d seriously question the bank that thought that was ok.
When I worked with big banks long ago that kind of thing would be shocking.
Definitely heard people in the banking area talk about how you just take money from other peoples accounts and if that person disputes it their bank then uploads a file over FTP and if a file never shows up then your bank should assume (but not know) the transfer is valid.
Too bad the link rotted: https://news.ycombinator.com/item?id=7636066
This can be, but definitely doesn't have to be, a typical relational database in conjunction with a core banking system.
I don't see what would inherently disqualify Mongo from being the backing layer for that core banking system then.