Synapse, a banking-as-a-service startup, has revealed that TabaPay has abandoned its plans to purchase its assets due to issues with banking partner Evolve Bank & Trust. However, Synapse CEO Sankaet Pathak believes that TabaPay can still be convinced to stay in the deal if Evolve meets the necessary closing conditions. The condition in question is that Evolve must fully fund its FBO accounts, but it has failed to do so. Despite Evolve’s assertion that it has satisfied the funding condition, Pathak claims that they have not. This unresolved issue has prevented TabaPay from closing the transaction.
It is worth noting that Synapse faced difficulties when its banking partner Evolve and business banking startup Mercury decided to end their relationships with the startup and work directly with each other. This decision led to a disagreement between Evolve and Synapse as their partnership was winding down. Pathak alleges that when Mercury and Evolve ended their partnership with Synapse, Mercury moved $49.6 million more out of the Synapse-affiliated accounts than Synapse believes was appropriate. Mercury claims that it has reconciled the transition away from Synapse.
Pathak has made these allegations public in the hopes of pressuring Evolve and Mercury to resolve the issue promptly. He believes that the resolution is critical to Synapse’s ability to close the TabaPay transaction. However, a spokesperson for Mercury denies these claims, stating that they have thoroughly investigated Synapse’s allegations and found them to have no merit.
In April, Synapse filed for Chapter 11 bankruptcy, and TabaPay agreed to acquire its assets pending bankruptcy court approval. The purchase price of $9.7 million was significantly lower than the amount of venture capital Synapse had raised over time. TabaPay, backed by SoftBank, is an instant money movement platform based in Mountain View.
This turn of events comes after Synapse laid off a significant portion of its workforce due to the impact of current macroeconomic conditions on its clients and platforms. Despite the setback, Synapse remains committed to finding a resolution and closing the TabaPay transaction.