Evolve Bank & Trust wants a lawsuit filed by former fintech partner Yotta tossed on the grounds that the lawsuit is more about failed middleware company Synapse than Evolve itself.
“Though the Complaint is long on allegations concerning Synapse’s failings, it is short on allegations against Evolve,” Evolve wrote in a request for dismissal Monday. “Yotta attempts to get around the fact that much of its Complaint is about Synapse by impermissibly engaging in group pleading.”
Evolve alleged that Yotta’s lawsuit treats Synapse and Evolve as the same entity, without specifying what each party did. Synapse is “a non-party who is immune from suit given it is in bankruptcy proceedings,” Evolve noted.
“These are more than just technical violations,” Evolve contended. “They are carefully crafted allegations to (a) avoid the reality that Evolve — as Yotta admits — was merely responsible for providing banking services, whereas Synapse was responsible for the reporting of these transactions and balances to Yotta end users; and (b) maintain a suit against Evolve because Synapse is immune from suit because it is in bankruptcy.”
Yotta alleged in its September lawsuit that Evolve “utterly failed in its most basic duty to its customers” by misappropriating or misplacing tens of millions of dollars in customer funds, and that Evolve’s illegal behavior began “long prior” to the collapse of Synapse in April.
Following Synapse’s collapse, customers at fintechs Yotta, Juno and Copper were unable to access tens of millions of dollars held in Synapse’s partner banks, which included Evolve.
Evolve’s reconciliation process left end users with pennies on the dollar of what they were owed. But Evolve said it didn’t have end users’ funds, and that the funds were at other partner banks including Lineage Bank, AMG, and American Bank NA.
The banks were collectively hit with a lawsuit in November by several affected customers alleging fund mismanagement.
A spokesperson for Evolve said the bank could not comment on its request for dismissal because it does not comment on active litigation. A spokesperson for Yotta declined to comment. A spokesperson for Synapse could not be reached for comment.
Meanwhile, customers are still out millions of dollars. Fight For Our Funds, a website created by and for Yotta customers whose money is tied up due to Synapse’s bankruptcy, claims that $40,287,067 remains owed to 4,803 customers.
Their average loss, according to FFOF, is $8,389.64. Banking Dive has heard from individual end users still awaiting returns of as much as $129,000 through bankruptcy proceedings.
“We have thousands of people who have literally been robbed of their life savings in front of a court, in front of government officials, in front of every regulatory body that regulates the [companies] involved. Every one of them – FINRA, the SEC, the CFPB – have watched thousands of people lose their life savings, and not a single person has come to help,” said Zach Jacobs, a Yotta customer and small business owner who received $128 of his $94,468 Yotta balance in Evolve’s reconciliation payout.
“The takeaway is, if it’s not Chase or Wells Fargo or Bank of America, [money] could disappear, and no one’s coming to help,” he said.
Synapse bankruptcy proceedings are ongoing and overseen by trustee and former Federal Deposit Insurance Corp. Chair Jelena McWilliams.
