Is the “YouTube Bank” about to be our next bank failure?

Is the so-called “YouTube Bank” about to go under and become our next Bank Failure?

(Article by Noah republished from 100PercentFedUp.com)

It’s very complicated, allow me to explain.

First of all, we’re talking about a bank called Yotta.

And it’s not actually, technically a “Bank”, it’s a “Savings App”.

Why is it called the “YouTube Bank”?

Because a couple years ago, many YouTubers all famously promoted Yotta to their audiences, the most prominent likely being Graham Stephan.  And let me just say I like Graham and his videos and I don’t think he did anything wrong here, but he was very prominent in promoting Yotta, even making a video titled “I Bought a Bank”.  That video is now deleted but I remember personally watching it when he posted it.

Ok, so what happened?

Or more accurately, what is happening?

Let me just give you the headline first and then we’ll break it all down:

Savings app CEO says 85,000 accounts locked in fintech meltdown: ‘We never imagined a scenario like this’

That’s from CNBC.

Not only are the accounts locked, but users are unable to withdraw any of their cash.

A total nightmare scenario.

The company is claiming it’s a problem between two “middlemen providers” but it’s extremely concerning whenever you can’t get your money out of a bank — or “savings app”.

And I am absolutely not claiming they are insolvent or going under — they claim they are not — but I will say this…..I saw the very same thing happen right before crypto brokerage Celsius went under.

I was actually live-tweeting and covering the story as it happened.

They announced a “glitch” with withdrawals and I immediately advised everyone to transfer their funds off the platform.

The company claimed all was safe and all was good, and then just hours later they had collapsed.

Is the same scenario happening here?

I don’t know.

I hope not.

According to Yotta, no funds are lost or at risk, it’s just a tech glitch.

Here are more details from CNBC:

When Adam Moelis co-founded a fintech startup named Yotta in 2019, he wanted to give Americans a new way to save money to help them cushion the ups and downs of life.

Instead, his company has inadvertently been a source of deep pain for thousands of customers who relied on Yotta accounts to receive paychecks, pay bills and save for emergencies.

The crisis began May 11, when a dispute between two of Yotta’s banking partners — fintech middleman Synapse and Tennessee-based Evolve Bank & Trust — led to the lockup of accounts at Yotta and at least two dozen other startups. Synapse declared bankruptcy earlier this year after several key clients abandoned the firm amid disagreements over the tracking of customer funds.

For the past three weeks, 85,000 Yotta customers with a combined $112 million in savings have been locked out of their accounts, Moelis told CNBC. The disruption had upended lives, forced users to borrow money for food and thrown upcoming events like surgeries or weddings into doubt, he said.

“The stories are heartbreaking,” Moelis said. “We never imagined something like this could happen. We worked with banks that are members of the FDIC. We never imagined a scenario like this could play out and that no regulator would step in and help.”

Boom & bust

The ongoing mess has exposed the risks in a corner of fintech that grew in prominence during a boom in venture investment — and it will likely reverberate for years as regulators increase scrutiny of the space.

The so-called “banking as a service” model allowed consumer fintech companies to quickly launch savings accounts and debit services, with firms like Synapse acting as a bridge between the startups and FDIC-backed banks that ultimately held deposits.

The heart of the dispute between Synapse and Evolve Bank involves a foundational function of finance: keeping accurate ledgers of transactions and balances. Synapse and Evolve disagree on how much of Yotta’s funds are held at Evolve, and how much are held at other banks that Synapse worked with.

Synapse hasn’t responded to requests for comment, and Evolve has blamed Synapse for the breakdown.

The Synapse bankruptcy has mostly ensnared lesser-known consumer fintech firms, especially after larger fintech players including Mercury and Dave fled the Synapse platform in the past year.

That has left Yotta, which encouraged users to save money with free weekly lottery-style sweepstakes, as one of the largest companies to be affected. Accounts at crypto firm Juno and at Copper, which offered savings accounts for families and teens, also have been frozen.

Non-systemic meltdown

Moelis, who has been in contact with other fintech principals impacted by the Synapse failure, estimates that at least 200,000 total customer accounts with balances are locked. While Synapse has said in court filings it has 10 million end users, it’s likely that active accounts are far smaller, Moelis said.

Adam Moelis, Co-Founder at Yotta Savings.

Courtesy: Yotta
The fintech co-founder said he believes the relatively limited scope of the issue, and the fact that most of those affected aren’t wealthy, has given regulators clearance to let the situation play out. Last year, regulators swiftly intervened in the regional banking crisis that threatened uninsured deposits of startups and rich families, he noted.

“To me, if this was happening at a larger scale, I think regulators would have done something by now,” he said. “We’ve got real, everyday Americans that aren’t necessarily wealthy and don’t have the ability to lobby that are being impacted.”

The Federal Reserve and the Federal Deposit Insurance Corp. have declined to comment on the issue. Representatives of the agencies have pointed to efforts they’ve made to encourage banks to manage the risks of using fintech partners.

Enter YouTuber “Coffeezilla” who is famous on YouTube for exposing scams.

He just posted this which is how I first learned of this issue:

To be fair, Coffeezilla says in his video he does not know if this is a scam or not, and I believe he even says he does not believe it is a scam.

But whatever it is (scam, bank failure, tech glitch, something else) it is NOT good.

And people are absolutely being crushed, with one man reporting he had $80,000 in the bank and it was his nest egg he was using after quitting his job to launch his own business.

Another woman reports being unable to pay rent.

What would you do if your bank account was suddenly just frozen?

Doesn’t matter how much money you have in there if you can’t use it!

Very scary.

We hope this situation is resolved soon and has a good outcome.

Whether or not this ends up being a “bank failure” or not, there is a reason why I keep warning you that a major run on the banks is coming.

Stay on guard.

And get your money out of the banks if you’re worried about this type of stuff!

Read more at: 100PercentFedUp.com