Instant payments company TabaPay has abandoned its plans to purchase the assets of troubled banking-as-a-service startup Synapse, TabaPay confirmed to TechCrunch today. Synapse says the problem is banking partner Evolve Bank & Trust. And Evolve says it is not involved, and not to blame. Meanwhile, another player in the saga, Mercury, says Synapse’s allegations have “no merit.”
Synapse’s counsel declared in bankruptcy court on Thursday that the deal would not be moving forward, Fintech Business Weekly’s Jason Mikula shared on LinkedIn. A spokesperson for TabaPay confirmed to TechCrunch on Thursday afternoon that the company had “pulled out,” adding that TabaPay had sent “termination notice of the purchase agreement this morning based on failure to meet the purchase agreement closing conditions.”
Synapse CEO and co-founder Sankaet Pathak, however, believes that TabaPay can still be convinced to stay in the deal. He told TechCrunch that his “understanding is that TabaPay is still interested in doing the acquisition, but Evolve has failed to meet their closing condition for TabaPay to be able to close.”
That closing condition is that Evolve Bank & Trust must fully fund its FBO accounts and has thus far failed to do so, according to Pathak. FBO stands for “For Benefit Of” account, and is defined as “a bank or investment account that is set up to receive funds on behalf of a third party or beneficiary.”
For its part, an Evolve spokesperson told TechCrunch that “Evolve was not party to the Tabapay (sic) acquisition, and we did not have closing conditions to meet. However, we did have a settlement agreement with Synapse that had a funding condition. Evolve satisfied that condition.”
Still, Pathak maintained that: “Until last night Evolve had communicated that it would be funding its FBO accounts as required by the parties’ settlement agreement, but it continued to request extensions to resolve the issue with Mercury and to obtain Mercury’s buy-in,” Pathak told TechCrunch. “And last night, Evolve informed Synapse and TabaPay that they had fully funded the accounts – while they have not. Given that open issue – TabaPay is unable to close the transaction.”
San Francisco-based Synapse, which operated a platform enabling banks and fintech companies to develop financial services, was founded in 2014 by Bryan Keltner and Pathak. It was providing those types of services as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury.