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May 20, 2024

Latest updates on banking and card services

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Updated as on June 8, 2024: The new Chapter 11 trustee, Jelena McWilliams, presented her initial report to the US Federal court. Her report details out the timeline of events and her interactions with all the relevant stakeholders including partner banks, fintech platforms, regulatory authorities and end users. Her appointment has instilled confidence among fintechs and end users for a swift resolution. Her commitment was highlighted further when she requested a call with the Juno team over the Memorial Day weekend immediately after her appointment. Juno has offered resources at our disposal to help the trustee expedite the process of end user withdrawals.

The trustee has been instructed by the court to prioritize getting users access to their funds as the top priority. In that spirit, the trustee has presented some immediate steps forward while all the Partner Banks continue their reconciliation process, which according to the trustee could take several weeks. From all the options she presented in the hearing, her recommendation is that Partner Banks should release pro rata amounts of end user funds immediately and the remaining balances will not be paid out while reconciliation efforts continue.

The exact process and pro rata amounts eligible for withdrawals are still not known at this time and we await instructions from the trustee for the next steps. As soon as we get instructions from the trustee, our team is ready to execute on the next steps and ensure end users get access to their funds. We will keep you informed about the next steps and any actions you may need to take.

In the hearing, Juno's counsel highlighted that Juno platform's end users continue to remain affected and are still unable to access funds for 4 weeks now. Our counsel also appreciated the progress being made and the urgency shown by the trustee to get users access to their funds. Our counsel also agreed with the trustee's recommendation to provide interim relief to the end users by releasing pro rata amounts immediately while final reconciliation continues. This provides end users access to funds in the most equitable manner.

What happened?

  1. On May 7th, 2024, we were notified that Lineage Bank, Member FDIC, halted ACH processing for all Synapse Brokerage accounts, and that Evolve Bank & Trust, Member FDIC, would now process ACH transactions on behalf of Synapse Brokerage. Juno's end users hold accounts with Synapse Brokerage.
  1. On May 11th, 2024, we were notified by Evolve Bank & Trust that they would be immediately halting card payments. They also stopped processing any incoming ACHs and Wires. Please note that both end user account and routing numbers as well as the debit card is issued by Evolve Bank & Trust. These events have left Synapse Brokerage without an ACH processor, and Evolve Bank & Trust’s decision to freeze cards and incoming ACHs and Wires is causing transactions to fail.
  1. On May 13th, 2024, we learned in court proceedings that Evolve Bank & Trust had taken this action because they were unable to access a key dashboard provided by Synapse which according to Evolve Bank & Trust was necessary to perform their duties as a regulated financial institution. Again, we have no control over these actions by Synapse or Evolve Bank & Trust and we learned about this only after Evolve Bank & Trust had already frozen accounts and restricted access to end user funds.
  1. On May 24th, 2024, a hearing took place in the US federal court regarding the ongoing dispute between Evolve and Synapse. While the dispute remains unresolved, significant progress was made during the hearing.
  1. On May 25, 2024, Jelena McWilliams, the former Chairman of the Federal Deposit Insurance Corporation (FDIC), was appointed as the Chapter 11 Trustee for Synapse. The court instructed Trustee McWilliams to prioritize ensuring end users have access to their funds. Additionally, the court mandated regular weekly updates from the US trustee on the progress being made.

How does this impact you?

  1. All programs that work with Synapse are impacted by this. Incoming & Outgoing ACH transfers, Incoming Wire Transfers and card transactions will not go through until the banks restore their services. Direct deposits and other incoming transfers will be returned back to the source during this period.
  1. As stated in your brokerage account customer agreement, customer funds in the Synapse Brokerage Program are deposited in a network of member FDIC banks. Funds held in these banks are eligible for FDIC insurance up to $250,000 for each individual account. Funds held with Synapse Brokerage LLC also have SIPC insurance up to $500,000, including $250,000 for cash, for each individual account.

Please note that Synapse Financial Technologies, Inc., has filed for Chapter 11 and not Synapse Brokerage LLC. Evolve Bank & Trust in a recent press release, has stated that “As a robustly well-capitalized FDIC institution exceeding the capital thresholds for the highest category of capitalization under PCA (“well capitalized”), our primary focus is on ensuring the protection of end user funds."

Where are the funds and when can end-users get access to their funds?

We know this is frustrating for you, but we currently lack sufficient information regarding the exact location of the end-user funds. We understand the importance of this matter and are working around the clock to get ACH and card processing restored, which will enable customers to transact. Ultimately, it is up to Evolve Bank & Trust to restore card services, and Lineage or Evolve Bank & Trust or another processing bank to restore ACH services.

What we are doing about it

  1. Juno, on May 17, 2024, also represented end-user concerns to the federal US court overseeing these issues between Synapse and Evolve Bank & Trust. The court has directed the parties involved to meet and confer and find a resolution. The court felt that fintechs like Juno had no role to play in being a part of this mediation process to reach a resolution.
  1. Our compliance team has reached out to the Federal Reserve Board which regulates Evolve Bank & Trust and FINRA which regulates Synapse Brokerage LLC to make them aware of this situation.
  1. We are also working on providing a new cash account for users so that you can start getting your direct deposits, pay bills or buy crypto again. Our team is working tirelessly in the interest of our users and community. We hope to provide these new accounts to users in the coming weeks.

This entire situation has been incredibly difficult and frustrating for us as well and the entire team who has been caught in the crosshair of an ongoing issue between Synapse and Evolve Bank & Trust. We have had very limited visibility and information of the whole situation and our team is only communicating what we are made aware of or what is publicly available. Juno is a financial technology company, not a bank. We do not custody cash or crypto and work with regulated partners to provide these services.

We are as disappointed as you are with these sequence of events. This has been extremely difficult for our team and our business. We understand that the trust of our customers, which we have worked incredibly hard for over the years, has been severely impacted. We are going to work extremely hard to regain your trust and rebuild our business. Please remember that every single member of our team is completely dedicated to serving you and your interests. Our team is working nights and weekends to figure out a solution and create an alternative path to restore access to essential financial services.

Over the last 6 months we have attempted several times to diversify our banking stack and even spent 3 months of engineering resources to integrate with a new partner. Given that our platform offers crypto adjacent services, it has been incredibly difficult to get a final approval from a bank partner to onboard customers. This is a broader problem specific to the crypto industry due to the current regulatory climate not being favourable to crypto or crypto adjacent companies.

If you have any questions or need any assistance, please feel free to reach out to our support team. Our support team is working round the clock to answer your questions and share whatever information is available to us.

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Juno (CapitalJ Inc.) is a financial technology company, not a bank. Certain services are offered through Synapse Financial Technologies, Inc. and its affiliates (“Synapse”). Brokerage accounts and cash management programs are provided through Synapse Brokerage LLC (“Synapse Brokerage”), an SEC-registered broker-dealer and member of FINRA and SIPC. Additional information about Synapse Brokerage can be found on FINRA’s BrokerCheck. See Synapse Terms of Service, Privacy Policy, and the applicable disclosures and agreements available in Synapse’s Disclosure Library for more information. The Partner Financial Institution(s) participating in a Synapse cash management program are referred to in your Synapse Brokerage Customer Agreement.

Digital Asset services are provided by Zero Hash, which is not affiliated with Juno or Synapse. Digital Assets are highly speculative in nature, involve a high degree of risk and can rapidly and significantly decrease in value. It is reasonably possible for the value of Digital Assets to decrease to zero or near zero. Digital Assets held in your Zero Hash account are not protected by FDIC insurance or any other government-backed or third party insurance.

The Juno card is issued by Evolve Bank & Trust, Member FDIC, pursuant to license by Mastercard International.

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