Synapse victims look to small-claims court

The Consumer Financial Protection Bureau said late last month that it had allocated additional funds to repay users affected by the Synapse fintech crisis, which cut off thousands of end users from millions of their own dollars in 2024.

The agency allocated nearly $9 million in additional funds, for a total of $55.2 million thus far, to repay customers of fintechs Yotta and Juno. Those consumers were locked out of their accounts more than two years ago when Synapse, the middleware firm connecting those fintechs to banks, went bankrupt.

Following a resolution process by Synapse partner banks, thousands of end users were still out as much as $95 million – and with no public timeline on the CFPB’s fund disbursement, some are turning to small-claims court to recoup their funds.

Kasey Greer, an independent house cleaner in St. Paul, Minnesota, had $4,655 in a Yotta account, stowed away for taxes. But she was locked out of her funds, like thousands of others – and last year was inspired by a post on LinkedIn encouraging affected customers to bring their cases to small-claims court.

Filing was easy and straightforward, she said, for a nominal fee of $80. Evolve Bank & Trust, Yotta’s partner bank, was named as defendant. And on Jan. 9, she won her case against the bank by default – because no one from Evolve came to the trial, which was on Zoom.

“I feel good about it,” Greer said in a phone interview. After the court decided Evolve needed to pay her, Greer alleged that Evolve tried to force her to sign a nondisclosure agreement and to retract her formal claims. She declined, opting to file a satisfaction of judgment – a legal filing showing that a court-ordered debt has been paid completely – once she received her funds.

Evolve declined to comment on Greer’s allegations. The bank ultimately paid Greer $4,735.57, which included the court filing fee and the money locked in her Yotta account, on May 12.

“I'm glad I didn't have to sign the NDA. I'm really glad that I can tell my story,” she said, further alleging that Evolve representatives tried to “intimidate” and “bully” her.

The LinkedIn post that inspired her to file a case in small-claims court was written by fellow Yotta user Patrick Spaulding Ryan, an attorney who authored the small-claims guide online early last year after being out roughly $7,500 himself.

He said he filed his claim in July 2024. A judge in Alameda County, California, ordered Evolve to return his funds, which he received near the end of that calendar year.

“As frustrating as this small-claims process is, and as unpredictable as it is, I do think that it's the best way that people have for recovery,” Ryan said.

Not everyone is successful, however. Ryan’s daughter, Carolyn Ryan, pursued her own case against Evolve in small-claims court last year to recoup the $2,411 in student loan funds that were in her Yotta account.

Her small-claims case was unsuccessful. As was the case of Patty Gelbrich, a Yotta user based in Central Coast, California, who is still out roughly $1,500 of the $5,000 once held in her Yotta account. (Evolve returned the other $3,500.)

Ryan (the elder) said some “two to three dozen” others have reached out to him in the past two years, seeking advice on their small-claims cases, or arbitration. Several have filed, to varying degrees of success.

“I've gotten some very happy texts from people,” Ryan said. “One lady sent me a bottle of wine.”

Gelbrich, who lost her small-claims case, told Banking Dive she was glad to have filed, despite the outcome.

“I’m glad I went through with suing Evolve because, as difficult and exhausting as the process was, I knew I couldn’t just let it go,” Gelbrich said. “It wasn’t only about the money. It was about holding Evolve accountable for what happened and standing up for myself and everyone that this has happened to.”

The legal process was “overwhelming,” she said, but she was ultimately glad she stuck it out.

“I feel like I gave myself a voice when it would’ve been much easier to walk away,” she said. “Sometimes you have to be willing to do the hard thing … because you know it’s the right thing to do.”

A timeline for CFPB fund disbursement isn’t clear. The CFPB’s semiannual report released in March said the funds would “be distributed in the coming months.” But a contract for the firm hired to handle the claims and reimbursement process – Rust Consulting – has a “potential” end date of Aug. 16, 2028, Fintech Business Weekly reported last week.