TabaPay has abandoned plans to buy the assets of troubled banking-as-a-service startup Synapse, TabaPay confirmed to TechCrunch today. Synapse says the problem is banking partner Evolve Bank & Trust. And Evolve says it’s not involved and not to blame. Meanwhile, another player in the saga, Mercury, says Synapse’s claims have “no merit.”
Synapse’s lawyer told bankruptcy court Thursday that the deal won’t go forward, Fintech Business Weekly’s Jason Mikula shared on LinkedIn. A TabaPay spokesperson confirmed to TechCrunch on Thursday afternoon that the company has “withdrawn,” adding that TabaPay had sent “a notice of termination of the purchase agreement this morning due to non-compliance with the closing terms of the purchase agreement.”
Synapse CEO and co-founder Sankaet Pathak, however, believes TabaPay can still be convinced to stick with the deal. He told TechCrunch that “his understanding is this TabaPay is still interested in making the acquisition, but Evolve has failed to meet the closing condition for TabaPay to close.”
That closing condition is that Evolve Bank & Trust must fully fund its accounts at the FBO, and so far it has failed to do so, according to Pathak. FBO means “for the benefit of an account” and is defined as “a bank or investment account established to receive funds on behalf of a third party or beneficiary”.
For its part, an Evolve spokesperson told TechCrunch that “Evolve was not involved in the acquisition of Tabapay (sic) and we had no closing conditions to adhere to. However, we had a settlement agreement with Synapse that had a funding clause. Evolve met that requirement.”
However, Pathak asserted that: “Until last night Evolve had communicated that it would fund its FBO accounts as required by the parties’ settlement agreement, but continued to request extensions to resolve the issue with Mercury and obtain the Mercury buy-in. ,” Pathak told TechCrunch. “And last night, Evolve informed Synapse and TabaPay that they had fully funded the accounts – when they haven’t. Given this open issue – TabaPay cannot close the transaction.”
San Francisco-based Synapse, which operated a platform that enables banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and Pathak. He provided such services as an intermediary between banking partner Evolve Bank & Trust and banking startup Mercury.
Synapse ran into difficulties last year after acting as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to end their respective relationships with Synapse and work directly with each other, Evolve and Synapse were reportedly at odds with each other as the relationship ended. (Evolve is not to be confused with another Mercury partner, Choice Bank, which the FDIC is reviewing for compliance in how it allowed Mercury accounts to be opened abroad.)
In a medium postPathak alleges that when Mercury and Evolve ended their partnership with Synapse, Mercury transferred $49.6 million more from Synapse-related accounts than Synapse believed it should and did not settle the overdraft.
In October, Mercury said publicly that the transition from Synapse was complete and “reconciled”.
“Our hope by open sourcing this information is that there will be a public outcry (at least from our customers) that will prompt Evolve and/or Mercury to quickly resolve this issue rather than hoping that this problem will go away.” ,” Pathak wrote. “This resolution is important to Synapse and our ability to be able to close the TabaPay transaction. It is our understanding that Taba would complete the acquisition if Evolve met the closing condition of funding its accounts.”
In a written statement, a Mercury spokesperson told TechCrunch: “We have thoroughly investigated Synapse’s claims since they were brought to our attention in March 2024 – six months after migrating from Synapse – and we are confident that they have no merit and all clients’ funds are counted’.
The spokesperson added: “After Mercury sued Synapse in December 2023 seeking to recover significant revenue from Mercury that Synapse was withholding in breach of its contract, Synapse began fabricating claims and counterclaims against Mercury. These allegations vary in number and type, and we have investigated them all with considerable care, but they have all been found to be unfounded.” Mercury specifically denies allegations that “Mercury customers’ FBO accounts were allegedly overdrawn.”
On April 22, TechCrunch reported that Synapse had filed for Chapter 11 bankruptcy and that its assets would be acquired by TabaPay, according to the two companies.
The deal was pending bankruptcy court approval.
The $9.7 million purchase price was significantly lower than the more than $50 million in venture capital Synapse had raised from investors such as Andreessen Horowitz, Trinity Ventures and Core Innovation Capital over time.
Founded in 2017 and based in Mountain View TabaPay is an instant money transfer platform backed by SoftBank in a 2022 round of an undisclosed amount. It’s unclear how much venture capital it has raised.
Last October, Synapse laid off 86 people, or about 40% of the company. This comes after the startup previously let go of 18% of its workforce last June. At the time, Synapse said “current macroeconomic conditions” had begun to impact its customers and platforms, impacting its expected growth.
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