With the Synapse bankruptcy case seemingly nearing some kind of conclusion, impacted end users are left wondering, will they ever get their money back?

While, at this point, Synapse cofounder and former CEO Sankaet Pathak can’t really answer that question, he is able to provide greater context on what happened and why.

In this podcast, recorded as a X (formerly Twitter) livestream yesterday, November 11th, I had the chance to interview Pathak and impacted depositors had an opportunity to ask him questions directly.

Key takeaways I had from the conversation include:

* Pathak revealed that Evolve had sent him a cease and desist as a result of him posting what he says is an anonymized version of the trial balance report of the funds Evolve held for end users.

* A description of the process by which Evolve prepared and sent files to Synapse for reconciliation, including a possible reason why balances between Evolve’s systems and Synapse’s appeared to varied substantially day to day, and Evolve’s claim that this wasn’t something to worry about, Pathak said.

* Pathak said that Evolve was aware of and acknowledged that fees owed to Tabapay were improperly debited from customer funds, but that Evolve disputed whether it was the bank’s fault.

* Synapse didn’t want Synapse Brokerage to contract with Evolve or keep the Brokerage’s funds at Evolve due to the known shortfalls, Pathak said.

* The plan with the Brokerage structure, per Pathak, was that incoming funds would land in users’ DDA accounts at Evolve, a portion of those funds that users would transact with would stay at Evolve, and the rest would be swept out to AMG. However, Pathak says, in late September or early October 2023, Evolve, without explanation why, ceased processing sweeps out of Evolve to AMG.

* Pathak described how Evolve’s reversal of position on funding the FBO shortfalls led to the collapse of the deal for Tabapay to acquire Synapse’s assets and, ultimately, the collapse of the company and freeze of end user funds.

* Pathak acknowledged taking two loans from the company, one in late 2023 and one in early 2024, which totaled $320,000. The transactions, Pathak said, were approved by the Synapse board — though, at the time, the board consisted of Pathak himself, a seed round investor that, and a Synapse cofounder. While Pathak didn’t name specific individuals, per filings in the bankruptcy case, the seed investor is Doug Marchant and the Synapse cofounder is Hilary Quirk. Pathak declined to elaborate on the purpose of the loans, besides saying he had “good reasons” to do it, which would “become obvious” relatively soon.

* Full reconciliation should be possible, Pathak said, but it would require the right data, resources, people, and time.

* Pathak acknowledged anonymously leaking a letter that Synapse had sent to Evolve to me (which I suspected at the time but didn’t know until now.)

* According to Pathak, Synapse’s board of directors, which, at points, included Andreessen Horowitz’s Angela Strange, Trinity Venture’s Schwark Satyavolu, and Core Innovation Capital’s Arjan Schütte, was broadly aware of the issues Synapse faced, that they were “trying to do the right thing,” and that the board ask Pathak “not to shut down and escalate.”

* While Chapter 11 trustee McWilliams and Judge Martin Barash have made numerous references to not being able to confirm or deny if they have made any referrals to law enforcement, Pathak said that he is not aware of any criminal investigation and has not been contacted by law enforcement authorities, though he did acknowledge speaking with broker-dealer self-regulator authority Finra.

* When asked if, in the regular course of its business, Synapse had any interaction with Evolve’s regulators, the St. Louis Federal Reserve or the Arkansas Department of Banking, Pathak indicated that it did not.

Additional Context & Fact Checking

* Pathak suggested that Evolve or others not suing him for defamation should be interpreted as a sign that he’s telling the truth. However, Evolve has explicitly stated that it believes Pathak’s claims about a shortfall of end user funds and the causes of it are “based on ledgers that are demonstrably inaccurate and that his company prepared” (see FAQ #17 here.) It’s also worth noting that Evolve may have other reasons to avoid filing such a suit against Pathak — namely, that Evolve would presumably have to turn over relevant documents as part of discovery in any such suit.

* Pathak said that Synapse launched the brokerage sweep program in October 2023, in response to Evolve raising Synapse’s reserve requirement and withholding interest payments owed to end users, fintech programs, and Synapse. However, the Synapse Brokerage entity had been up and running for sometime by this point, and Synapse had been working with many of its programs to migrate them to the new structure since significantly earlier in 2023.

* Asked directly if Pathak or Synapse ever inappropriately used end user funds, including using end user funds to meet bank reserve requirements, Pathak said he was not aware of any instances of customer funds being misappropriated. Pathak described the allegation that Synapse used customer funds to meet reserve requirements at Lineage as “factually false.” However, Pathak’s answer glosses over that it was Synapse that would have instructed from Evolve to Lineage and, per my prior reporting, represented that these were Synapse’s own funds, not end users’.

* Pathak also denied that Synapse knowingly allowed fees Synapse owed to be debited from end user funds, saying that, as soon as such issues came to the company’s attention, it alerted Evolve and worked to fix them. However, Pathak did not specify if when these types of issues occurred, whether or not end user balances were made whole.

* Asked about his robotics startup’s attempt to raise funds and purported relationship with GM, first reported by me and subsequently confirmed by CNBC, Pathak described the CNBC reporter as “a piece of s**t” and “highly unethical,” alleging that the reporter contacted an auto industry union leader, not GM, leading the union leader to threaten a strike if GM didn’t pull out of the deal. However, the CNBC piece quoted a GM spokesperson as saying, “GM has never invested in Foundation Robotics and has no plans to do so. In fact, GM has never had an agreement of any kind with the company. Any claims to the contrary are fabricated.” GM sent me a statement to the same effect.

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Laura Bower, "The Imposter" (Gnome Road Publishing, 2024)