California Says Yotta Misled Customers Before Synapse Collapse

California regulators have ordered FinTech Yotta Technologies to pay $1 million, adding another enforcement action to the long fallout from the collapse of banking-as-a-service middleman Synapse.

Yotta’s model mixed savings with gamification. The company offered sweepstakes games and prizes to customers who opened savings accounts, a pitch designed to make saving money feel more engaging.

The California Department of Financial Protection and Innovation (DFPI) said Thursday (May 15) that San Francisco-based Yotta engaged in deceptive acts or practices by marketing customer accounts as safe and FDIC insured, even after moving those accounts to Synapse Brokerage, which did not protect FDIC protection. Synapse filed for bankruptcy shortly afterward, leaving many customers unable to access their funds.

The settlement points to a broader regulatory concern: Consumers often see the app, not the complex web of banks, brokerages and technology providers behind it. That structure can make deposit protection hard to understand, especially when a nonbank company markets accounts in language that sounds like traditional bank protection.

“Yotta blatantly deceived thousands of California customers,” DFPI Commissioner KC Mohseni said in the agency’s announcement, adding that the company’s actions “ultimately result[ed] in millions of dollars in lost funds.” The DFPI said Yotta must stop making deceptive claims, notify California customers with positive balances as of May 17, 2024, and provide information about possible recovery through the Consumer Financial Protection Bureau’s Civil Penalty Fund.

PYMNTS has followed the Yotta and Synapse fallout as a case study in the risks of layered FinTech banking models.

In June 2024, PYMNTS reported that 85,000 Yotta accounts were caught in the Synapse meltdown, with customers locked out amid disputes between Synapse and Evolve Bank & Trust. PYMNTS later reported on ledger irregularities tied to Yotta end-user funds, and in September covered Yotta’s lawsuit against Evolve.

The broader lesson has become harder to ignore: As FinTechs, sponsor banks and middleware providers divide responsibility, regulators are demanding clearer accountability for what customers are told and where their money actually sits.