Instant payments company TabaPay has abandoned plans to buy the assets of struggling banking-as-a-service startup Synapse, TabaPay confirmed to TechCrunch today. Synapse says the problem is banking partner Evolve Bank & Trust. And Evolve says it is not involved and may’t be blamed. Meanwhile, one other player in the saga, Mercury, says Synapse’s allegations have “no basis.”

In bankruptcy court Thursday, Synapse’s attorney said the deal wouldn’t proceed, Fintech Business Weekly’s Jason Mikula shared on LinkedIn. A spokesperson for TabaPay confirmed to TechCrunch on Thursday afternoon that the company had “withdrawn,” adding that TabaPay sent a “notice of termination of the purchase agreement due to failure to meet the closing conditions of the purchase agreement” this morning.

Synapse CEO and co-founder Sankaet Pathak, nonetheless, believes TabaPay can still be convinced to stay in the deal. He told TechCrunch that “that is his understanding TabaPay continues to be fascinated by the acquisition, but Evolve has not met the closing condition for TabaPay to close.”

That final condition is that Evolve Bank & Trust must fully fund its FBO accounts, which Pathak says has not been achieved to date. FBO means “For Benefit Of” account and is defined as “a bank or investment account established to receive funds on behalf of a third party or beneficiary.”

For its part, an Evolve spokesperson told TechCrunch that “Evolve was not a party to the Tabapay (sic) acquisition and we had no closing conditions to satisfy. However, we reached a settlement with Synapse that included a financing condition. Evolve has met this requirement.”

Still, Pathak maintained that: “Until yesterday, Evolve advised that it would fund its FBO accounts as required by the parties’ settlement agreement, but continued to request an extension of time to resolve the issue with Mercury and obtain Mercury’s approval, Pathak told TechCrunch . “And last night, Evolve informed Synapse and TabaPay that they had fully funded their accounts – although they had not. Given this open issue – TabaPay is unable to close the transaction.”

San Francisco-based Synapse, which operated a platform that permits banks and fintech firms to develop financial services, was founded in 2014 by Bryan Keltner and Pathak. It provided this kind of service as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury.

Synapse bumped into trouble last yr after acting as an intermediary between banking partner Evolve Bank & Trust and business banking startup Mercury. When Evolve and Mercury decided to end their relationships with Synapse and work together directly, Evolve and Synapse reportedly had a falling out with one another as the relationship got here to an end. (Evolve mustn’t be confused with one other Mercury partner, Choice Bank, which the FDIC is investigating for overcompliance for the way it allowed Mercury accounts to be opened overseas).

IN average postPathak says when Mercury and Evolve have ended their partnership with SynapseMercury transferred $49.6 million more from Synapse-related accounts than Synapse said it must have and failed to reconcile the overdraft amount.

In October, Mercury publicly stated that its departure from Synapse was complete and “reconciled.”

“We hope that by openly sourcing this information, there will be public outcry (at least from our customers) that will motivate Evolve and/or Mercury to address this issue quickly, rather than hoping the problem will go away,” Pathak wrote. “This resolution is significant for Synapse and our ability to close the TabaPay transaction. We understand that Taba will complete the acquisition if Evolve meets the closing condition on funding their accounts.”

In a written statement, a Mercury spokesperson told TechCrunch: “We have thoroughly investigated Synapse’s claims since they were brought to our attention in March 2024 – six months after migrating from Synapse – and we believe they are without merit and all customer funds are being accounted for “

The spokesperson added: “After Mercury sued Synapse in December 2023 in an attempt to recuperate significant revenues from Mercury that Synapse withheld in breach of contract, Synapse began crafting allegations and counterclaims against Mercury. These claims varied in number and kind, and we investigated all of them with great care, but all of them were found to be unfounded. Mercury specifically denies allegations that “Mercury customer FBO accounts were allegedly overdrawn.”

On April 22, TechCrunch reported that according to each firms, Synapse had filed for Chapter 11 bankruptcy and that its assets could be acquired by TabaPay.

The transaction was awaiting approval from the bankruptcy court.

The $9.7 million purchase price was well below the greater than $50 million in enterprise capital that Synapse has raised over time from investors equivalent to Andreessen Horowitz, Trinity Ventures and Core Innovation Capital.

Founded in 2017, headquartered in Mountain View TabaPay is an quick money flow platform that SoftBank backed in a 2022 round for an undisclosed amount. It’s unclear how much enterprise capital he raised.

Last October, Synapse laid off 86 people, or about 40% of the company. This comes after the startup laid off 18% of its employees in June last yr. At the time, Synapse said “current macroeconomic conditions” had begun to impact its customers and platforms, impacting expected growth.