Federal regulatory body CFPB files lawsuit against Synapse, intending to distribute recovered funds to affected consumers
The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Synapse Financial Technologies, a FinTech company, for allegedly violating consumer protection laws. The lawsuit, filed on August 21, comes 16 months after Synapse's bankruptcy.
Synapse's founder, Sankaet Pathak, did not respond to requests for comment. Pathak is known for founding Synapse Financial Technologies, but specific details about his personal background and career are not readily available in the public domain.
The CFPB claims that Synapse failed to properly track funds and maintain accurate records, causing substantial injury to consumers. As a result, many consumers have not received the full amount of their account balance with the FinTech platform for weeks or months during the reconciliation process.
Last year, the CFPB repaid $384 million to 191,000 victims of Think Finance's illegal lending practices, demonstrating the bureau's commitment to protecting consumers.
In this current case, the proposed final judgment includes a $1 civil money penalty as part of a stipulated judgment and order entered on August 21. It also includes injunctive relief and prohibits Synapse's sale of customer information.
The proposed final judgment for Synapse also involves the allocation of funds from the CFPB's civil penalty fund. However, if the September 16 deadline is missed, there could be a potential delay of up to six months in the allocation of these funds for victim relief. As of September 2024, the CFPB's civil penalty fund had more than $118 million available for such purposes.
Todd Baker, a senior fellow, suggested that using the CFPB's fund to pay end users would be a better outcome for claimants than continuing to search for someone to take the blame.
In response to the lawsuit, the court-appointed Chapter 11 bankruptcy trustee for Synapse, Jelena McWilliams, has asked for the stipulated judgment and order to be entered no later than September 16.
Sam Mesquita, a Yotta customer, expressed hope that impacted individuals will see some resolution due to the CFPB's action. However, no new facts about the amount of money consumers may receive from the Synapse case were provided.
This development underscores the CFPB's vigilance in protecting consumers and holding financial institutions accountable for their actions. The bureau did not respond to requests for comment regarding the Synapse case. A bankruptcy court hearing for Synapse is scheduled for September 11.
