TabaPay has abandoned its plans to buy the assets from 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 is not involved and is not to blame.
Synapse’s lawyer declared in bankruptcy court on Thursday that the deal would 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 “retired,” but did not provide additional details.
Synapse However, CEO and co-founder Sankaet Pathak believes TabaPay can still be convinced to keep the deal. He told TechCrunch that his “understanding is that TabaPago “It is still interested in making the acquisition, but Evolve has not met the closing conditions for TabaPay to close.”
That final condition is that Evolve Bank & Trust must fully fund its FBO accounts and so far it has not done so, according to Pathak. FBO means “for benefit account” and is defined as “a bank or investment account that is set up 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 final conditions to meet. However, we had a settlement agreement with Synapse that had a financing condition. Evolve fulfilled that condition.”
Still, Pathak maintained that: “As of 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 Mercury’s buy-in. Pathak told TechCrunch. “And last night, Evolve informed Synapse and TabaPay that they had fully funded the accounts, even though they did not do so. Given that open issue, TabaPay cannot close the transaction.”
Synapse ran into difficulties last year after serving 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, it was reported that Evolve and Synapse were disagree with each other while the relationship was ending. (Evolve should not be confused with another Mercury partner, Choice Bank, which the FDIC is investigating over compliance with how allowed the opening of Mercury accounts abroad.)
In a medium publicationPathak alleges that when Mercury and Evolve ended their partnership with Synapse, Mercury moved $49.6 million more out of Synapse-affiliated accounts than Synapse believes it should have and has not reconciled the overdraft.
In October, Mercury said publicly that the transition away from Synapse was complete and “reconciled.”
“Our hope with open access to this information is that there will be a public outcry (at least from our customers) that will motivate Evolve and/or Mercury to quickly resolve this issue rather than hope it goes away,” Pathak wrote. “This resolution is important for Synapse and our ability to close the TabaPay transaction. It is our understanding that Taba would complete the acquisition if Evolve met its final condition of financing its accounts.”
Mercury could not immediately be reached for comment.
On April 22, TechCrunch reported that Synapse had filed for Chapter 11 bankruptcy and that its the assets would be acquired by TabaPayaccording 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 that Synapse had raised from investors such as Andreessen Horowitz, Trinity Ventures and Core Innovation Capital over time.
Founded in 2017, headquartered in Mountain View TabaPago is an instant money movement platform that SoftBank backed in a 2022 round for an undisclosed sum. It’s unclear how much venture capital it has raised.
San Francisco-based Synapse, which operated a platform that enabled banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and Pathak.
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