TabaPay has abandoned plans to buy the assets of troubled banking-as-a-service startup Synapse, it confirmed to TechCrunch today. Synapse said the problem lay with banking partner Evolve Bank & Trust. Evolve said it was not involved and assumes no responsibility.

Fintech Business Week’s Jason Mikula shared on LinkedIn that Synapse’s lawyers announced in bankruptcy court on Thursday that the deal would not move forward. A TabaPay spokesperson confirmed to TechCrunch on Thursday afternoon that the company had “exited,” but did not provide further details.

However, Synapse CEO and co-founder Sankaet Pathak believes TabaPay can still be persuaded to stay in the deal. He told TechCrunch that his “understanding is that TabaPay is still interested in making the acquisition, but Evolve has not been able to meet the closing conditions that would have enabled TabaPay to complete the acquisition.”

Pathak said a condition of the deal was that Evolve Bank & Trust must fully fund its FBO account, but so far it has not done so. FBO stands for “Account Benefit” and is defined as “a bank or investment account established to receive funds on behalf of a third party or beneficiary.”

For its part, a spokesperson told TechCrunch, “Evolve was not a party to the acquisition by Tabapay (sic) and we had no closing conditions that needed to be met. However, we did enter into a settlement agreement with Synapse that had financing conditions. Evolve This condition is met.”

Still, Pathak insisted: “As late as last night, Evolve had stated that it would fund its FBO account as required by the parties’ settlement agreement, but it continued to request an extension to resolve its issues with Mercury and obtain Mercury’s support,” Pathak maintained. Tucker told TechCrunch. “Last night, Evolve notified Synapse and TabaPay that they had fully funded these accounts, when in fact they had not. In light of this outstanding issue – TabaPay was unable to complete the transaction.”

Synapse ran into difficulties last year after acting as a middleman between banking partner Evolve Bank & Trust and commercial banking startup Mercury. When Evolve and Mercury decided to end their respective relationships with Synapse and work directly together, there were reports of disagreements between Evolve and Synapse as the relationship ended. (Evolve is not to be confused with another Mercury partner, Choice Bank, which is being investigated by the FDIC for excessive compliance with regulations that allowed Mercury to open accounts overseas.)

Pathak posted on Medium that when Mercury and Evolve ended their relationship with Synapse, Mercury withdrew $49.6 million more from the Synapse affiliate account than Synapse believed it should and did not adjust the overdraft.

In October, Mercury publicly stated that the transition away from Synapse was complete and “accommodating.”

“We hope that by open sourcing this information we will create a public outcry (at least from our customers) that will incentivize Evolve and/or Mercury to resolve this issue quickly, rather than hoping that this issue will go away,” Pathak wrote. “This resolution “It is critical to Synapse and our ability to complete the TabaPay transaction that Taba will complete the acquisition if Evolve meets the closing conditions to fund its account.”

Mercury could not immediately be reached for comment.

On April 22, TechCrunch reported that Synapse had filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, and its assets would be acquired by TabaPay, according to the two companies.

The deal is pending bankruptcy court approval.

The $9.7 million purchase price is significantly lower than the more than $50 million in venture capital Synapse has raised over time from investors including Andreessen Horowitz, Trinity Ventures and Core Innovation Capital.

Mountain View-based TabaPay, an instant funds transfer platform founded in 2017, raised an undisclosed amount in a round of funding from SoftBank in 2022. It’s unclear how much venture capital it has raised.

Headquartered in San Francisco and founded in 2014 by Bryan Keltner and Pathak, Synapse operates a platform that lets banks and fintech companies develop financial services.

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