The Financial Industry Regulatory Authority (FINRA) has launched an investigation into allegations of misconduct by former executives of Synapse Financial Technologies Inc., a now-defunct fintech company whose collapse earlier this year left thousands of customers unable to access their savings.
The regulatory scrutiny centers on Synapse’s brokerage arm, with former CEO Jeffrey Stanley and former Chief Compliance Officer Mark Paverman facing charges related to mismanagement and failure to adhere to regulatory standards.
The fallout from Synapse’s bankruptcy highlights the vulnerabilities in fintech-banking partnerships and raises questions about oversight in the evolving financial technology sector.
Synapse Financial Technologies, founded in 2014 and based in San Francisco, positioned itself as a key player in the banking-as-a-service (BaaS) industry, acting as a middleware provider that enabled fintech companies to integrate banking services into their platforms.
Backed by investors like Andreessen Horowitz, Synapse facilitated relationships between fintech apps and FDIC-insured banks, managing over $2 billion in customer deposits across millions of accounts.
However, the company’s abrupt Chapter 11 bankruptcy filing in April 2024 triggered a crisis, freezing customer funds and exposing significant discrepancies in its financial records.
According to bankruptcy trustee Jelena McWilliams, a shortfall of approximately $85 million in customer funds remains unaccounted for, leaving many consumers, including those reliant on fintech apps like Yotta and Juno, without access to their money for months.
FINRA’s investigation, detailed in a complaint dated August 28, 2025, focuses on Stanley and Paverman’s roles in Synapse’s brokerage operations.
Stanley, the former president and CEO of Synapse Brokerage, is accused of failing to obtain proper customer authorization for opening cash-management accounts and neglecting to address significant discrepancies between Synapse’s ledgers and those of its partner banks.
These oversights allegedly contributed to the chaos that ensued when Synapse’s partner bank, referred to as “DDA Bank 1” in regulatory filings, halted transactions in May 2024, locking more than $100 million in customer funds.
Stanley’s attorney has reportedly denied the allegations, stating that he intends to “vigorously defend himself” against FINRA’s claims.
Paverman, meanwhile, faces charges for failing to preserve critical email and instant message records, a violation of FINRA’s stringent compliance requirements.
Additionally, in May 2023, Paverman allegedly provided false information to FINRA, claiming Synapse Brokerage had independent access to its books and records when, in reality, it relied heavily on its parent company.
This misrepresentation further complicated regulatory oversight. Paverman has not publicly responded to the allegations, and attempts to reach him for comment have been unsuccessful.
Notably, while Stanley is no longer registered with any financial firm, Paverman remains affiliated with five other FINRA member firms, raising concerns about his ongoing role in the industry.
The Synapse case underscores broader systemic issues in the fintech sector, particularly in the “banking-as-a-service” model, where fintechs act as intermediaries between consumers and banks.
The collapse revealed the risks of inadequate ledger controls and unclear custodial arrangements, which can leave customer funds vulnerable.
FINRA’s actions signal a broader push for stricter oversight of fintech-driven brokerages, especially those operating in regulatory gray areas.
The regulator’s recent fines against firms like US Tiger and TradeUP for similar record-keeping violations indicate a growing focus on compliance in the sector.
The Consumer Financial Protection Bureau (CFPB) has also taken action, filing a lawsuit against Synapse in August 2025, alleging unfair practices due to the company’s failure to maintain accurate records of customer funds.
The CFPB proposed a $1 civil penalty to access its Civil Penalty Fund to compensate affected consumers.
As regulatory scrutiny intensifies, the Synapse collapse serves as a cautionary example for the fintech industry, emphasizing the need for adequate compliance frameworks to protect consumers.