In a bankruptcy court hearing on Thursday, Synapse’s legal team announced that the deal would not proceed, a development shared by Jason Mikula of Fintech Business Weekly on LinkedIn. A TabaPay spokesperson confirmed to TechCrunch that the company had “pulled out” of the deal, citing a failure to meet the closing conditions of the purchase agreement.

However, Sankaet Pathak, Synapse’s CEO and co-founder, remains hopeful that TabaPay can be persuaded to stick with the deal. He told TechCrunch that while TabaPay is still interested in the acquisition, Evolve has failed to meet a crucial closing condition, which is causing the delay.

According to Pathak, the condition in question is that Evolve Bank & Trust must fully fund its FBO (For Benefit Of) accounts, something it has yet to do. An FBO account is a bank or investment account set up to receive funds on behalf of a third party or beneficiary.

Evolve, on the other hand, told TechCrunch that it was not a party to the TabaPay acquisition and had no closing conditions to meet. However, it did have a settlement agreement with Synapse that included a funding condition, which Evolve claims to have satisfied.

Pathak insists that Evolve had communicated its intention to fund its FBO accounts as required by the settlement agreement, but kept asking for extensions to resolve an issue with Mercury and to secure Mercury’s approval. He added that Evolve informed Synapse and TabaPay that they had fully funded the accounts, which was not the case. This unresolved issue is preventing TabaPay from closing the transaction.

Synapse, based in San Francisco, was founded in 2014 by Bryan Keltner and Pathak. The company provided a platform that enabled banks and fintech companies to develop financial services, acting as an intermediary between its banking partner, Evolve Bank & Trust, and business banking startup Mercury.

Synapse faced challenges last year when Evolve and Mercury decided to end their respective relationships with Synapse and work directly with each other. This led to a reported conflict between Evolve and Synapse as the relationship was winding down.

Pathak alleges in a Medium post 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 it should have, and has not reconciled the overdraw.

Mercury publicly stated in October that the transition away from Synapse was complete and “reconciled.” Pathak hopes that by sharing this information, it will prompt a public outcry that will motivate Evolve and/or Mercury to quickly resolve the issue.

A Mercury spokesperson told TechCrunch that they have thoroughly investigated Synapse’s claims since they were first brought to their attention in March 2024, six months after Mercury migrated off of Synapse, and are confident that they have no merit and all customer funds are accounted for.

The spokesperson added that after Mercury sued Synapse in December 2023 to recover significant Mercury revenue that Synapse had withheld in violation of their contract, Synapse began making allegations and counterclaims against Mercury. Mercury has investigated all these claims and found them to be without merit. Mercury specifically denies the allegations that “Mercury customer FBO accounts were allegedly overdrawn.”

The deal was awaiting approval from the bankruptcy court.

The purchase price of $9.7 million was significantly lower than the over $50 million in venture capital that Synapse had raised from investors such as Andreessen Horowitz, Trinity Ventures, and Core Innovation Capital.

TabaPay, founded in 2017 and based in Mountain View, is an instant money movement platform that received backing from SoftBank in a 2022 funding round of an undisclosed amount. The total amount of venture capital it has raised is unclear.

Last October, Synapse laid off 86 people, or about 40% of its workforce.

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