According to a TabaPay spokesperson, the termination notice was sent to Synapse citing failure to meet the closing conditions outlined in the purchase agreement. Synapse's CEO confirmed via a LinkedIn message to Banking Dive that the failure stemmed from Evolve Bank & Trust, Synapse’s banking partner, not fully funding the required accounts.
Evolve Bank & Trust, however, refuted claims of involvement in TabaPay’s agreement with Synapse, stating that they were not party to the agreement and did not have any closing conditions to meet. They did acknowledge a settlement agreement with Synapse that included a funding condition, which they claim to have satisfied.
Synapse officials expressed their belief that TabaPay would still be willing to acquire Synapse if the issues with Evolve were resolved but expressed scepticism about the resolution. Despite this, in a blog post, officials alleged that Mercury, Synapse’s former partner, continued to use Synapse services and program accounts at Evolve even after stating publicly that its migration was complete. Mercury denied these claims, asserting that it had completed its migration away from Synapse and refuted allegations made by Synapse.
Synapse, founded in 2014, is an Embedded Finance platform facilitating the development of financial services for banks and fintechs. It faced legal challenges, including a USD 30 million arbitration case filed by Mercury, alleging contract violations.
The proposed acquisition by TabaPay, announced in April 2024, was contingent upon bankruptcy court approval. Synapse filed for Chapter 11 bankruptcy, citing it as the preferred option to facilitate the deal with TabaPay. The potential acquisition aimed to leverage Synapse’s assets and clientele, benefiting from its bank partners and existing client base.
The financial technology sector, particularly Banking-as-a-Service, has faced increased regulatory scrutiny according to Yahoo Finance, with Synapse experiencing economic and regulatory challenges in recent months. This includes layoffs and regulatory pressures on bank-fintech partnerships, exemplified by Lineage Bank’s consent order with the Federal Deposit Insurance Corp.
Despite TabaPay’s intentions to incorporate Synapse’s assets and personnel, economic and regulatory challenges persisted for Synapse, impacting its operations and growth prospects.
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