TabaPay has abandoned plans to acquire the assets of troubled banking-as-a-service startup Synapse, TabaPay confirmed to TechCrunch today. Synapse says the problem lies with its banking partner, Evolve Bank & Trust. And Evolve claims it was not involved and is not responsible. Meanwhile, Mercury, another party to the story, says Synapse's allegations are “without merit.”
Synapse's lawyers declared Thursday in bankruptcy court that the deal will not move forward, FinTech Business Weekly's Jason Mikula shared on LinkedIn. A TabaPay spokesperson confirmed to TechCrunch on Thursday afternoon that the company had “stepped down,” but provided no further details.
However, Synapse CEO and co-founder Sankaet Pathak believes TabaPay can still be persuaded to stay in the deal. “While it is our understanding that TabaPay remains interested in the acquisition, Evolve has not met the closing conditions for TabaPay to complete the acquisition,” he told TechCrunch.
A condition of the closing is for Evolve Bank & Trust to fully fund the FBO account, which has so far not been possible, Pathak said. FBO stands for “forBenefit of Account” and is defined as “a bank or investment account set up to receive funds on behalf of a third party or beneficiary.”
Meanwhile, an Evolve spokesperson told TechCrunch, “Evolve was not a party to the Tabapay (sic) acquisition and there were no closing conditions to meet. However, we have entered into a settlement agreement with Synapse that includes financing conditions. Evolve met that criteria.”
Still, Pathak insisted: “Up until last night, Evolve had communicated that it would fund the FBO account based on the settlement agreement between the parties, but continued to request an extension to resolve the issue with Mercury and obtain Mercury’s consent. ,'' Pathak told TechCrunch. “And last night, Evolve notified Synapse and TabaPay that they had fully funded the account, which they had not yet done. Given the outstanding issues, TabaPay is unable to close the transaction.”
Synapse ran into trouble last year after acting as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. Evolve and Synapse were reportedly at odds with each other as their relationship was dissolving when Evolve and Mercury decided to end their respective relationships with his Synapse and work directly with him. (Evolve is not to be confused with another Mercury partner, Choice Bank, which the FDIC is investigating for its compliance with how it allowed Mercury to open accounts overseas. )
In a post on Medium, Pathak said that when Mercury and Evolve ended their partnership with Synapse, Mercury moved $49.6 million more out of Synapse-related accounts than Synapse intended and did not adjust for the overdraw. insisted.
In October, Mercury publicly stated that he had completed his transition from Synapse and was “reconciled.”
“What we hope by open sourcing this information is to incentivize Evolve and Mercury to solve this problem quickly (at least for customers), rather than hoping that this problem will go away. (from) a public outcry,” Pathak wrote. “This resolution is important to Synapse and our ability to complete the TabaPay transaction. Our understanding is that Taba will complete the acquisition once Evolve satisfies the closing conditions of funding the account. .”
A Mercury spokesperson told TechCrunch in a written statement: “We have thoroughly investigated Synapse’s claims since we were made aware of them in March 2024, six months after we migrated from Synapse, and we have found them without merit. , we are confident that all benefits will be taken into account. ”
After Mercury sued Synapse in December 2023 seeking to recover significant amounts of revenue from Mercury that Synapse had withheld in violation of the contract, Synapse began fabricating accusations and counterclaims against Mercury. These claims vary in number and variety, and although we have investigated them all with great care, all have been found to be meaningless. ” Mercury clearly denies the allegations that “Mercury customers' FBO accounts are suspected of having been overdrawn.''
On April 22, TechCrunch reported that Synapse has filed for Chapter 11 bankruptcy and its assets will be acquired by TabaPay, according to the 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 over time from investors including Andreessen Horowitz, Trinity Ventures, and Core Innovation Capital.
Founded in 2017, Mountain View-based TabaPay is an instant money transfer platform backed by SoftBank in a private funding round in 2022. It's not clear how much venture capital has been raised.
San Francisco-based Synapse operates a platform that enables banks and fintech companies to develop financial services and was founded in 2014 by Bryan Keltner and Pathak.
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