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Doubtful, if only because data breaches never(?) kill companies. Thanks for pointing that article out. It made me reconsider whether it’s wise to keep money in

Doubtful, if only because data breaches never(?) kill companies. Thanks for pointing that article out. It made me reconsider whether it’s wise to keep money in Mercury. EDIT: this rabbit hole goes deep. https://techcrunch.com/2024/05/16/a-us-trustee-wants-troubled-fintech-synapse-to-be-liquidated-via-chapter-7-bankruptcy-cites-gross-mismanagement/ https://techcrunch.com/2024/05/16/a-us-trustee-wants-trouble... "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, among others." Mercury is by far the best bank I’ve ever used. But they’re not actually a bank, just a partner to one, and the foundations seem shakier than they appeared. I hadn’t really stopped to consider "what if Mercury goes out of business?" till now. Silicon Valley Bank seemed like a one-off disaster, but now I’m not so sure. Is there any bank that isn’t awful? Even just reliable wire transfers was beyond the capabilities of US Bank, for example, and it was a business account.

blakeburnette 2y ago
Mercury itself is not FDIC insured. If Mercury collapses, your money is not insured. If Evolve collapses, your money is insured. That's the official stance. The majority of the banking industry is built on Cobol. Open Banking is the only real path forward. The issue of the US vs EU open-banking is the number of community banks. The, unfortunate, most reliable banks from a technology/data perspective are ones that are large enough to be loathsome to deal with. Think JP Morgan, BoA. Even banks of that size, Comerica, have had massive ledgering issues recently, so they are not immune. Some reputable players in the BaaS industry are Unit, JP Morgan, Jack Henry, Moov(Massive plug for them), VGS (works with Visa and MC btw). If your neo-bank works with them, I would trust my money there. I do trust my money with one of those partners.
- gnicholas 2y ago
  > Mercury itself is not FDIC insured. If Mercury collapses, your money is not insured. How is it not false advertising on the part of Mercury to describe their accounts as FDIC-insured if this is the case?
  - blakeburnette 2y ago
    This gets into the nuances of fintech, BaaS and neo-banking. A consumer cannot reasonably be expected to understand these. The industry and regulators have effectively stated as such. Your money is, indeed, technically FDIC insured to 250k. It is not insured against the collapse of an intermediary party such as Mercury. FDIC insurance ONLY covers the collapse of a chartered US bank.
  - Animats 2y ago
    The real question for these third party services is whether each customer has a separate bank account. If there's one bank account per customer, and the third party service goes down, accessing the money probably isn't too bad. You can deal with the bank. They have regulators and obligations. If it's one consolidated account, then it probably takes a bankruptcy court to untangle the mess.
    - blakeburnette 2y ago
      Regarding FBOs, that is exactly what is happening with Synapse/Evolve. Customer funds and corporate funds were all comingled and reconciled across an inaccurate ledger held within an FBO. Whether the inaccuracies belong to the bank, or to Synapse is where the debate lies. What is also incredibly suspect in this case is that Mercury was able to transfer (IIRC) 49 million USD of money from Synapse's established FBO with Evolve to Evolve directly (under the ownership of Mercury). The ability for Mercury to have moved these funds is a massive red flag. Regarding regulators and obligation -- in any of these relationships the bank is ultimately responsible/liable for any AML/TFL, money, etc... irregularities. A BaaS provider can effectively do everything wrong to the point its underlying bank is shut down, and switch to a different partner bank.
      - Animats 2y ago
        > Regarding FBOs, that is exactly what is happening with Synapse/Evolve. Customer funds and corporate funds were all comingled and reconciled across an inaccurate ledger held within an FBO. Ugh. The bankruptcy court has to bring in forensic auditors, they try to reconstruct who owns what, and it takes a long time to sort things out. The bank's responsibility is only to have the total amount on deposit available to the bankruptcy court. This is a really good argument for not using such a service.
Animats 2y ago
The question is, if you have money stuck in Synapse, were records at Evolve that would help retrieve it compromised? "The collapse of middleman Synapse has revealed fintech’s promise of safety as a mirage. More than 100,000 Americans with $265 million in deposits have been locked out of their accounts."[1] Evolve has problems: Fed report on Evolve: "Examinations conducted in 2023 found that Evolve engaged in unsafe and unsound banking practices by failing to have in place an effective risk management framework for those partnerships. In addition, Evolve did not maintain an effective risk management program or controls sufficient to comply with anti-money laundering laws and laws protecting consumers."[2] The combination of a collapse on the fintech side, bad risk management on the bank side, and a "hack" looks bad. It also raises the possibility that the "hack" might be an inside job to cover up theft. We've seen that happen in crypto land more than once. [1] https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-promise.html https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-p... [2] https://www.federalreserve.gov/newsevents/pressreleases/enforcement20240614a.htm https://www.federalreserve.gov/newsevents/pressreleases/enfo...

blakeburnette 2y ago

Mercury itself is not FDIC insured. If Mercury collapses, your money is not insured. If Evolve collapses, your money is insured. That's the official stance. The majority of the banking industry is built on Cobol. Open Banking is the only real path forward. The issue of the US vs EU open-banking is the number of community banks. The, unfortunate, most reliable banks from a technology/data perspective are ones that are large enough to be loathsome to deal with. Think JP Morgan, BoA. Even banks of that size, Comerica, have had massive ledgering issues recently, so they are not immune. Some reputable players in the BaaS industry are Unit, JP Morgan, Jack Henry, Moov(Massive plug for them), VGS (works with Visa and MC btw). If your neo-bank works with them, I would trust my money there. I do trust my money with one of those partners.

gnicholas 2y ago
> Mercury itself is not FDIC insured. If Mercury collapses, your money is not insured. How is it not false advertising on the part of Mercury to describe their accounts as FDIC-insured if this is the case?
- blakeburnette 2y ago
  This gets into the nuances of fintech, BaaS and neo-banking. A consumer cannot reasonably be expected to understand these. The industry and regulators have effectively stated as such. Your money is, indeed, technically FDIC insured to 250k. It is not insured against the collapse of an intermediary party such as Mercury. FDIC insurance ONLY covers the collapse of a chartered US bank.
- Animats 2y ago
  The real question for these third party services is whether each customer has a separate bank account. If there's one bank account per customer, and the third party service goes down, accessing the money probably isn't too bad. You can deal with the bank. They have regulators and obligations. If it's one consolidated account, then it probably takes a bankruptcy court to untangle the mess.
  - blakeburnette 2y ago
    Regarding FBOs, that is exactly what is happening with Synapse/Evolve. Customer funds and corporate funds were all comingled and reconciled across an inaccurate ledger held within an FBO. Whether the inaccuracies belong to the bank, or to Synapse is where the debate lies. What is also incredibly suspect in this case is that Mercury was able to transfer (IIRC) 49 million USD of money from Synapse's established FBO with Evolve to Evolve directly (under the ownership of Mercury). The ability for Mercury to have moved these funds is a massive red flag. Regarding regulators and obligation -- in any of these relationships the bank is ultimately responsible/liable for any AML/TFL, money, etc... irregularities. A BaaS provider can effectively do everything wrong to the point its underlying bank is shut down, and switch to a different partner bank.
    - Animats 2y ago
      > Regarding FBOs, that is exactly what is happening with Synapse/Evolve. Customer funds and corporate funds were all comingled and reconciled across an inaccurate ledger held within an FBO. Ugh. The bankruptcy court has to bring in forensic auditors, they try to reconstruct who owns what, and it takes a long time to sort things out. The bank's responsibility is only to have the total amount on deposit available to the bankruptcy court. This is a really good argument for not using such a service.

Animats 2y ago

The question is, if you have money stuck in Synapse, were records at Evolve that would help retrieve it compromised? "The collapse of middleman Synapse has revealed fintech’s promise of safety as a mirage. More than 100,000 Americans with $265 million in deposits have been locked out of their accounts."[1] Evolve has problems: Fed report on Evolve: "Examinations conducted in 2023 found that Evolve engaged in unsafe and unsound banking practices by failing to have in place an effective risk management framework for those partnerships. In addition, Evolve did not maintain an effective risk management program or controls sufficient to comply with anti-money laundering laws and laws protecting consumers."[2] The combination of a collapse on the fintech side, bad risk management on the bank side, and a "hack" looks bad. It also raises the possibility that the "hack" might be an inside job to cover up theft. We've seen that happen in crypto land more than once. [1] https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-promise.html https://www.cnbc.com/2024/07/02/synapse-fintech-fdic-false-p... [2] https://www.federalreserve.gov/newsevents/pressreleases/enforcement20240614a.htm https://www.federalreserve.gov/newsevents/pressreleases/enfo...