Bank Evolve allegedly breached its fundamental responsibility and swindled customers, according to a filed lawsuit.
Yotta Technologies and Evolve Bank & Trust: A Protracted Legal Battle Over Missing Customer Funds
A legal battle between Yotta Technologies and Evolve Bank & Trust is underway, centering around allegations of misappropriation of customer funds linked to the collapse of Synapse Financial Technologies. Yotta customers, who have been left without access to their funds totaling over $100 million since Evolve froze Yotta accounts in May 2024, allege that Evolve Bank, as Synapse’s lead banking partner, failed to safeguard these funds properly and may have engaged in misconduct.
The situation is complicated by Synapse’s Chapter 11 bankruptcy, with ongoing motions to convert it to Chapter 7 to facilitate resolution and asset recovery. Yotta contends that Evolve Bank mismanaged or misappropriated entrusted customer deposits, leading to a protracted legal fight where Evolve won a motion to dismiss certain claims, but Yotta continues to pursue allegations against Evolve.
Current status of Yotta customers' funds
Many Yotta customers remain unable to access their funds more than a year after Synapse’s bankruptcy. Evolve Bank announced plans in late 2024 to begin issuing payments to affected fintech end users, but many claim payments are significantly less than the amounts they deposited or had listed in their accounts, leading to customer shock and dissatisfaction.
Reconciliation processes managed by Evolve and Synapse have been slow and incomplete, with Evolve maintaining copies of Synapse’s AWS data as part of ongoing efforts to trace funds and support legal actions. The Federal Reserve issued an enforcement order against Evolve Bank regarding its third-party fintech partnerships, indicating regulatory concern over Evolve’s risk and control failures.
A newly appointed Evolve CEO in August 2025 is tasked with restoring trust and addressing these complex legacy issues. The Consumer Financial Protection Bureau (CFPB), courts, and Evolve's new leadership aim to eventually make claimants whole, but the exact fate and timeline for restoring all customer funds remain uncertain.
Additional developments
- Sankaet Pathak, founder and CEO of Synapse, shared a series of social media posts about Evolve Bank & Trust's technology issues on Aug. 20, 2024.
- Evolve Bank & Trust debited customer accounts for over $25 million, according to Synapse's records, without authorization from customers.
- Pathak alleges that Evolve's core system is outdated and difficult to integrate with.
- The Federal Deposit Insurance Corp. (FDIC) has proposed a rule to strengthen recordkeeping requirements for bank deposits held by third parties. The proposed rule provides for oversight by the banks' primary federal regulator to review for, and compel, compliance with the rule. A public comment period on the proposal will be open for the next 60 days.
- FDIC Chair Martin Gruenberg stated that the proposed rule aims to ensure banks know the actual owner of deposits and their ability to provide the depositor their funds.
This ongoing legal battle and the ensuing fallout have left many Yotta customers struggling to pay their bills and some even losing their life savings. Evolve's management is accused of hiding technology issues rather than addressing them, and of inflating account balances to make it appear as if the misappropriated funds remained in customers' accounts. The FDIC's proposed rule is a response to these issues, aiming to strengthen the FDIC's ability to make deposit insurance determinations and pay deposit insurance if the bank fails.
Yotta customers, who are still struggling to access their funds more than a year after Synapse’s bankruptcy, are grappling with the impacts of the legal battle between Yotta Technologies and Evolve Bank & Trust. The business relationship between the two institutions, which includes fintech partnerships, is at the center of allegations involving misappropriated customer funds, technology issues, and insufficient record-keeping. The Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) are both involved, with the FDIC proposing a rule to strengthen recordkeeping requirements for bank deposits held by third parties to prevent future incidents in the finance industry.
