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It's Thanksgiving weekend in the
United States, which kicks off a

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holiday season in which 
Americans eat Turkey and watch 

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films about bank runs. 
These are American traditions. 

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In keeping with this tradition, 
CNBC reported last week that 

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thousands of Americans have seen
their savings vanish with the 

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collapse of a financial tech 
company called Synapse. 

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The article gives the example of
a school teacher who deposited 

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the proceeds of her home sale, 
so basically her life savings, 

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into an influencer promoted bank
called Yada. 

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She first found herself locked 
out of that account. 

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This went on for over six months
and last week she learned that 

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she would only be getting 
$500.00 of her $280,000 back 

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from Yada. 
That is .18% of her savings that

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they're returning to her. 
She is, of course, not the only 

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victim. 
According to a court appointed 

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trustee, up to $96 million of 
customer funds have vanished 

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entirely at Yatta, which was a 
fintech, not a bank, despite 

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being promoted as a bank by a 
number of big Youtubers. 

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Almost 14,000 customers report 
that they're being offered a 

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combined $11.8 million despite 
having deposited almost $65 

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million. 
It's not clear how this money is

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being divided up, as some 
customers, like the school 

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teacher I mentioned earlier, are
doing a lot worse than others. 

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Yatta is a particularly strange 
example of a fintech, where it 

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was originally launched as 
offering Prizelink savings 

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accounts, which are savings 
accounts in which the depositor 

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receives a low interest rate but
then has the chance of winning a

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large amount of money in a 
sweepstakes. 

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The New York Times described 
Yatta a year ago as a smart way 

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to turn gambling into a virtue. 
Andreessen Horowitz, a large 

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Silicon Valley VC firm, 
explained in their blog that 

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fintechs like Yada differentiate
themselves by appealing to the 

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aspirations and product demands 
of Gen. 

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Z, which I guess is gambling and
saving in a non FDIC insured 

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bank account. 
And This is why Gen. 

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Z are so hard to understand. 
Yatta originally offered 

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depositors an interest rate of 
0.2%, with the chance of winning

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up to $10 million, a price they 
later revised down to $1 

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million. 
It doesn't appear that the top 

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prize was ever won, and 
Coffeezilla reported on his 

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YouTube channel a few months ago
that Yatta pivoted from this 

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sort of gamified savings model 
into what was basically an 

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online casino, which they 
describe for legal reasons as an

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online sweepstakes model. 
Yotta itself has not declared 

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bankruptcy, but due to the 
bankruptcy of Synapse, a fintech

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company had relied on its 
customers lost access to their 

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funds. 
According to CNBC, Yotta and 

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other fintechs in this online 
saving space advertised that 

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their deposits were FDIC 
insured. 

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CNBC say that a contract that 
customers received from Synapse 

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after signing up for checking 
accounts stated that user money 

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was insured by the FDIC for up 
to $250,000. 

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The FDIC, in contrast, has been 
very clear that it's insurance 

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fund does not cover the failure 
of fintechs or other non banks, 

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and they've said that should 
such a firm fail, there's 

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nothing they can do. 
The Treasury Department actually

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saw this problem coming and 
issued a report two years ago to

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the White House Competition 
Council about the entry of non 

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banks into the consumer banking 
space. 

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The report argued that while neo
banks succeeded in increasing 

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competition for deposits with 
potential consumer benefits, 

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there was one problem. 
These firms are generally not 

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subject to the same oversight 
for safety and soundness or for 

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consumer protection. 
The report said that the 

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fintechs avoided becoming banks,
which is expensive and brings on

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regulatory burdens, instead 
choosing to partner with banks 

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so that they both compete with 
and work with banks, creating 

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regulatory gaps. 
Those very regulatory gaps are 

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the reason that all of this 
money can't seem to be traced. 

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And one of the VCs who funded 
Synapse, the fintech that 

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collapsed, has been in the press
this week saying that certain 

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financial regulators need to be 
shut down as they are slowing 

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down his innovative business 
practices. 

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In a recent episode of the Joe 
Rogan Experience, Marc 

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Andreessen, the Co founder of 
the VC firm Andreessen Horowitz,

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took shots at the Consumer 
Financial Protection Bureau. 

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I'll let the always well spoken 
Marc Andreessen explain the 

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issue himself. 
Umm. 

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So, for example, with this thing
called the Consumer Finance 

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Protection Bureau, CFPB, which 
was the it's sort of Elizabeth 

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Warren's personal agency that 
she gets to control, and it's an

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independent agency that just 
gets to run and do whatever. 

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It wants What does her agency 
do? 

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Whatever she wants. 
What does it do though? 

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We basically terrorize, 
terrorize financial 

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institutions, prevent fintech, 
prevent new competition, new 

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startups that want to compete 
with the big banks. 

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Oh yeah, How so? 
Just like terrorizing anybody 

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who tries to do anything new in 
financial services. 

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And can you give me an example? 
You know, de banking, this is 

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where a lot of the de banking 
comes from is the is these 

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agencies. 
So de banking is when you're you

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as either a person or your 
company are literally kicked out

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of the banking system. 
Like they did to Kanye. 

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Exactly like they did to Kanye. 
My, my, my partner, Ben's father

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has been debanked. 
Really. 

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We had an employee who for what?
We for having the wrong politics

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for for saying unacceptable 
things Under current banking 

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regulations. 
Under OK, here's a great here's 

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a great thing. 
Under current banking 

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regulations, after all the 
reforms of the last 20 years, 

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there's now a category called a 
politically exposed person Pep. 

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And if you are a PEP, you are 
required by financial regulators

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to kick them off of your to kick
them out of your bank. 

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Why you're not allowed? 
What if you're politically on 

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the left? 
That's fine. 

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No, because they're because 
they're not politically. 

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Exposed, so no one on the left 
gets debanked. 

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I have not heard of a single 
instance of anyone in the left 

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getting can. 
You tell me. 

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Now, we might need to Fact Check
some of what Mark just said. 

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While the CFPB was originally 
proposed by Elizabeth Warren in 

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2007, she was removed from 
consideration as its director by

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the Obama administration and has
never headed it up. 

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Its current director is Rohit 
Chopra, and I don't know if Mark

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struggles with face blindness or
something like that, but it's 

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not easy to mix the two of them 
up. 

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Rohit is a 42 year old man of 
Indian descent and Elizabeth is 

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a 75 year old woman of well, it 
doesn't matter. 

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It's hard to mix them up is what
I'm really trying to say now. 

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The audio seems to be a bit off 
in this section. 

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What does it do though? 
We basically terrorized 

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financial terrorized financial 
institutions. 

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Prevent fintech. 
Prevent new competition, new 

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startups that want to compete 
with the big banks. 

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But I think what Mark is saying,
and I may be wrong, is that the 

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CFPB supervises banks, thrifts 
and credit unions with assets of

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over $10 billion. 
Also supervising non depositary 

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mortgage originators and 
servicers, payday lenders, 

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consumer debt collectors, 
international money transfer and

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private student lenders. 
It's in place to protect 

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consumers from being ripped off 
by financial services providers,

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but it doesn't yet cover 
fintechs like Yatta and Sign Up.

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Mark accuses the CFPB of being 
involved in de banking and in 

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particular de banking 
conservatives. 

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This is entirely untrue. 
In fact, they do the opposite. 

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They investigate banks for 
discriminatory treatment of 

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customers. 
He goes on to effectively change

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the subject entirely to 
discussing politically exposed 

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persons. 
And while that's outside the 

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scope of this video, I do happen
to know a bit about that as I 

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ran a fund for many years. 
I'm amazed that Mark runs a 

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multibillion dollar fund and 
doesn't understand these rules. 

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Politically exposed persons are 
people like politicians, their 

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families, and their close 
business associates. 

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If a politically exposed person,
let's say someone like Hunter 

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Biden, wants to move a large sum
of money into a bank or an 

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investment fund, the financial 
institution accepting those 

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funds is required to investigate
the source of of those funds, 

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which usually involves asking 
the customer where the money 

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came from. 
If they say it came from selling

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their house or liquidating 
another investment, you then 

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have to ask them for documents 
proving this. 

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This can be a bit awkward and 
embarrassing, as your customer 

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often feels accused of 
wrongdoing, but most people in 

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this position are used to these 
procedures, which are in place 

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to prevent politicians from 
taking bribes or having bribes 

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passed to their family members 
or business associates on their 

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behalf. 
If Elizabeth Warren wanted to 

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invest $1,000,000 in an index 
fund, she would likely receive 

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this sort of scrutiny. 
She would have to explain the 

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source of the funds. 
Now in today's day and age, if a

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politically exposed person 
wanted to put money in your fund

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and said that the money came 
from crypto gains, there's a 

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good chance that you'd be unable
to take that money as crypto is 

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widely used in money laundering.
A lot of crypto people get upset

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when you say this, but financial
institutions can get in a lot of

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trouble if they touch dirty 
money. 

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So crypto gains or gambling wins
will lead to even more scrutiny 

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until a financial institution 
can be sure that the money was 

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earned. 
Honestly, when Chase closed 

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Kanye West's bank account a few 
years ago, who I believe prefers

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to be called Yee, this was no 
different to a restaurant or any

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other private business refusing 
to serve a customer. 

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It's constitutionally protected.
Now, I'm going to take Mark at 

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his word that he wants to have 
the CFPB shut down because of 

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this DE banking issue that he 
possibly misunderstands. 

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But Mark unfortunately missed 
this press release on the CFPB 

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website that came out about a 
week before his Joe Rogan 

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interview about how they're 
going to crack down on illegal 

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DE banking, which I'm sure he 
would have been delighted about.

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Oh, and there's there's another 
bit in there about how they plan

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to supervise the largest fintech
companies. 

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Now, maybe Mark's firm doesn't 
invest in fintech firms and he 

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didn't hear about this new 
development a week before he was

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on Joe Rogan's podcast. 
Let's take a look at his 

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website. 
Oh, look at that Synapse. 

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That's a fintech, isn't it? 
And there's loads of fintechs 

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and crypto stuff on the list. 
You know, the kind of stuff that

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American consumers might need to
be protected from. 

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They should probably remove sign
ups from their list of 

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investments though, because it 
did go bankrupt. 

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How would Mark not know about 
these investments? 

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It's, it's frankly, it's all 
over his website. 

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Does he not listen when he's 
sitting in the meetings? 

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Here's a blog post on his 
company website from 2021 about 

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fintech cozying up to the 
creator economy. 

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Oh look, a video link. 
Oh come on Mark, the Youtubers 

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know how to cover their tracks 
and you're leaving everything up

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on your website. 
Come on. 

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OK, so let's back up a bit. 
What? 

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What exactly is fintech anyhow? 
Well, the word is just a 

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combination of the words 
financial and technology, and 

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it's used to describe the use of
technology to deliver financial 

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services and products to 
customers. 

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And it can apply to areas of 
banking, insurance, investing, 

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or anything that relates to 
finance. 

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Examples range from peer-to-peer
payment services like Venmo and 

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Zell, to robo advisors to stock 
or crypto trading apps like 

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Robin Hood, to app based 
insurance companies like 

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Lemonade. 
Most of them advertise online. 

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Pick a narrow area of finance 
like taking deposits or making 

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short term loans and try to do 
it cheaper than a bank would, 

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often by automating customer 
service and by not needing any 

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physical branch locations. 
Synapse was a fintech company 

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that connected other fintech 
companies like Yatta to banks. 

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When you deposited money at 
Yatta, it was passed to Synapse 

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who deposited it in a bank which
held the money and was FDIC 

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insured. 
What Synapse did was keep track 

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of whose money was where. 
Yatta just needed to design A 

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gamified front end that people 
liked using and organised the 

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sweepstake. 
Synapse kept the records and a 

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bank held the money. 
Some of the fintechs like Yada 

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promised enhanced FDIC insurance
of up to $500,000 on their 

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websites, explaining that the 
funds would be deposited across 

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a network of FDIC insured banks.
Synapse described themselves as 

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a banking as a service provider 
where they provided the back end

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software for around 100 
different fintech companies who 

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had millions of customers and 
they deposited the money at four

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different partner banks. 
The fintechs and the banks all 

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relied on Synapse to track 
transactions and account 

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balances and determine how much 
money was in each customer 

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account at all times. 
Rather than licensing their 

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software, sign ups struck deals 
with both the banks and the 

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fintech apps. 
They handled customer 

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onboarding, KYC and anti money 
laundering checks, record 

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keeping, risk management and all
other compliance functions. 

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Sign ups created 4 benefit of 
accounts at the four partner 

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banks they dealt with, where the
fintech customer's money was 

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deposited into interest bearing 
pooled accounts. 

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Synapse, being a tech firm and 
not a bank, was mostly free of 

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regulatory oversight. 
In April, Synapse filed for what

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can only be described as a 
chaotic bankruptcy, where the 

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banks quickly lost access to all
customer and transaction data 

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that was being maintained by 
Synapse and found themselves 

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00:15:00,640 --> 00:15:03,200
unable to work out whose money 
was whose. 

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The accounts were all frozen 
until that could be worked out. 

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The problem seems to be that 
there's no good record, or at 

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least no good, easily accessible
record of whose money is whose. 

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00:15:15,520 --> 00:15:18,680
And the various companies 
involved are all accusing each 

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other of wrongdoing, as Marc 
Andreessen would say. 

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00:15:22,120 --> 00:15:25,120
Decrypt fintech. 
Prevent Decrypt Fintech. 

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00:15:26,320 --> 00:15:30,240
According to the most recent 
Bankruptcy Trustees report dated

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00:15:30,240 --> 00:15:35,920
November 13th, the four partner 
banks had $219,000,000 in 

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deposits from sign ups, and $187
million of that money has been 

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00:15:41,520 --> 00:15:46,520
dispersed to customers so far. 
So why isn't the FDIC insurance 

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kicking in then? 
Well, none of these apps are 

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banks, and for this reason they 
are not covered by FDIC 

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00:15:54,520 --> 00:15:57,960
insurance. 
The partner banks are FDIC 

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insured. 
But the banks didn't fail, the 

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00:16:00,720 --> 00:16:03,400
fintechs did. 
And the way they failed is not 

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by investing the money and 
losing it, but by losing track 

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of who the money belongs to. 
And that seems to be where we 

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are today. 
Regulators have mostly been 

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sidelined in this situation and 
this is because of the regular 

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00:16:18,360 --> 00:16:22,080
gaps that the Treasury warned 
about in its report to the White

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00:16:22,080 --> 00:16:24,520
House Competition Council two 
years ago. 

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Banks are required to show that 
they are keeping good records as

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obviously this is an important 
part of what banks do. 

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00:16:32,440 --> 00:16:36,080
But the bank's records just show
that the accounts belong to 

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fintechs and the Synapse failure
seems to mean that all detail 

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00:16:41,000 --> 00:16:44,560
beyond that is lost. 
The fintechs in question all 

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worked with banks who keep 
deposits of less than 10 billion

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dollars, and if you remember, 
that means that they are not 

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00:16:52,600 --> 00:16:55,840
overseen by the Consumer 
Financial Protection Bureau. 

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The FDIC has no role in the 
situation either, as no banks 

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00:17:01,080 --> 00:17:03,400
have failed, nor are they 
failing. 

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00:17:03,800 --> 00:17:07,160
At a hearing In June, a letter 
from the Federal Reserve was 

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00:17:07,160 --> 00:17:11,400
read out to the court stating 
that the Fed does not supervise 

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00:17:11,440 --> 00:17:15,760
or regulate fintech companies, 
nor does it mediate or have the 

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00:17:15,760 --> 00:17:19,599
authority to mediate disputes 
among commercial entities. 

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00:17:20,200 --> 00:17:23,119
It is expensive and time 
consuming to deal with 

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00:17:23,119 --> 00:17:26,640
regulators, and fintech 
companies are all about moving 

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quickly and keeping costs low. 
One of the ways of doing this is

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00:17:31,080 --> 00:17:35,000
to structure your business model
such that it works around 

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00:17:35,000 --> 00:17:38,440
existing regulation, which is 
what happened here. 

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00:17:38,640 --> 00:17:42,760
And customers love this lower 
price until it all goes wrong. 

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00:17:43,440 --> 00:17:47,800
The bankruptcy trustee, Gillenna
McWilliams, who was previously 

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00:17:47,800 --> 00:17:53,000
the chair of the FDIC, writes in
her report that the estate of 

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00:17:53,000 --> 00:17:57,360
Synapse does not have the funds 
to implement an independent 

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00:17:57,360 --> 00:18:01,240
reconciliation, nor any 
remaining operations or 

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00:18:01,240 --> 00:18:04,400
employees to participate in 
these efforts. 

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00:18:04,600 --> 00:18:08,640
So in plain English, Synapse, 
who built the technology to know

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00:18:08,680 --> 00:18:12,360
whose money is whose, has run 
out of money and no longer has 

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00:18:12,400 --> 00:18:14,720
any employees who can figure it 
out? 

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00:18:15,240 --> 00:18:17,640
Well, where have they all gone 
then? 

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00:18:18,120 --> 00:18:22,920
Well, Sankat Patak, the founder 
and CEO of Sign Ups, announced 

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00:18:22,920 --> 00:18:28,200
in August that he had raised $11
million in VC funding for a new 

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00:18:28,200 --> 00:18:30,760
robotic startup called 
Foundation. 

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00:18:31,360 --> 00:18:34,320
In his Twitter video, he said 
that he had been working on the 

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00:18:34,320 --> 00:18:38,440
start up for three months, so 
basically since the date of the 

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00:18:38,440 --> 00:18:43,240
bankruptcy announcement. 
And his goal is to automate GDP 

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00:18:43,240 --> 00:18:48,440
through AI and robotics to free 
people from labour jobs, 

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00:18:48,640 --> 00:18:50,920
allowing them to pursue their 
passions. 

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00:18:51,120 --> 00:18:56,280
He explains the declining birth 
rates will lead to severe labour

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00:18:56,280 --> 00:19:02,320
shortages in 20 to 30 years, 
risking civilizational collapse,

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00:19:02,560 --> 00:19:07,200
making this mission very urgent.
So yeah, I get it that some 

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00:19:07,200 --> 00:19:10,200
people are worried about having 
lost their life savings, but 

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00:19:10,200 --> 00:19:13,960
Sankat is battling 
civilizational collapse through 

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00:19:14,040 --> 00:19:18,240
AI robots, which is a noble 
cause indeed. 

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00:19:18,680 --> 00:19:23,040
His near term goal, according to
his Twitter feed, is to have a 

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00:19:23,040 --> 00:19:27,640
walking humanoid robot by year 
end, which will be quite a 

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00:19:27,640 --> 00:19:30,120
breakthrough. 
If he needs one quickly. 

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00:19:30,560 --> 00:19:33,760
I'd buy that Honda one that was 
running around and kicking a 

315
00:19:33,760 --> 00:19:37,120
football about 10 years ago. 
If there's one lesson that 

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00:19:37,120 --> 00:19:41,280
SANCAT should have learned from 
Synapse, it's that you don't 

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00:19:41,280 --> 00:19:43,160
always have to reinvent the 
wheel. 

318
00:19:43,560 --> 00:19:47,320
It's not all that clear how this
situation will resolve. 

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00:19:47,880 --> 00:19:51,520
The bankruptcy trustee has told 
the court that there's as much 

320
00:19:51,560 --> 00:19:56,000
as a $95 million shortfall, and 
the judge has said that he 

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00:19:56,000 --> 00:20:00,320
suspects that 10s of millions of
dollars will never be found. 

322
00:20:00,840 --> 00:20:05,760
He goes on to say this is a 
very, very unusual situation. 

323
00:20:06,400 --> 00:20:09,560
Rob Copeland, who I interviewed 
on this channel a few months 

324
00:20:09,560 --> 00:20:14,080
ago, wrote an article in the New
York Times saying that it's not 

325
00:20:14,080 --> 00:20:18,520
always easy to know if your 
online bank is actually a bank. 

326
00:20:18,760 --> 00:20:21,760
He says that start-ups 
frequently describe themselves 

327
00:20:21,760 --> 00:20:25,840
using permutations of the word 
bank, even if they aren't 1. 

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00:20:26,080 --> 00:20:29,840
He points out that on its 
website, Chime describes itself 

329
00:20:30,000 --> 00:20:34,160
as banking with no monthly fees.
And the fine print then reads, 

330
00:20:34,360 --> 00:20:38,040
Chime is a financial technology 
company, not a bank. 

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00:20:38,360 --> 00:20:42,760
The lender Albert, he says, uses
the slogan The Simple Way to 

332
00:20:42,760 --> 00:20:45,240
Bank, but then adds in the fine 
print. 

333
00:20:45,400 --> 00:20:49,280
Albert is not a bank. 
Rob advises that you read the 

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00:20:49,280 --> 00:20:52,880
fine print and if you're still 
unsure, he recommends emailing 

335
00:20:52,880 --> 00:20:56,600
customer service as a written 
record is always valuable. 

336
00:20:56,800 --> 00:21:00,160
He says that you should ask 
where your money is being held 

337
00:21:00,200 --> 00:21:02,720
and what other companies are 
involved. 

338
00:21:02,960 --> 00:21:06,400
He says that any company that 
can't provide a straightforward 

339
00:21:06,400 --> 00:21:10,320
answer may actually be giving 
you the answer you need. 

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00:21:10,920 --> 00:21:13,480
Now look, I'd love to stick 
around and tell you more about 

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00:21:13,480 --> 00:21:16,520
this situation, but over the 
last few minutes I've grown 

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00:21:16,520 --> 00:21:19,920
increasingly concerned about 
civilizational collapse. 

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00:21:19,920 --> 00:21:24,040
And so I need to go and get to 
work right away on building an 

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00:21:24,120 --> 00:21:27,480
AI powered robot, and I suggest 
that you do the same. 

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00:21:28,040 --> 00:21:30,120
Thanks for tuning into this 
week's podcast. 

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00:21:30,360 --> 00:21:33,120
If you want to support the 
podcast, you can support us on 

347
00:21:33,120 --> 00:21:37,160
Patreon or just e-mail a link to
a friend to help the podcast 

348
00:21:37,160 --> 00:21:39,360
grow. 
Have a great week and talk to 

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00:21:39,360 --> 00:21:40,920
you again soon. 
Bye.