Financial
regulators have filed charges against two former executives of Synapse
Brokerage, alleging their failures led to over $100 million in customer funds
being frozen and inaccessible for months.
The
Financial Industry Regulatory Authority (FINRA) charged Jeffrey Stanley, the
firm’s former CEO, with failing to properly supervise a cash management program
that ultimately left millions of customers unable to access their money. Mark
Paverman, the former chief compliance officer, faces charges for failing to
maintain required records and providing false information to regulators.
Banking-as-a-Service Model
Under Scrutiny
The case
centers on what regulators describe as a flawed
“banking-as-a-service” arrangement between Synapse Financial
Technologies and partner banks. By September 2023, the platform had grown to
handle over $2 billion in customer deposits across millions of accounts.
Problems
emerged when Synapse Fi couldn’t reconcile its records with those of one of its
banking partners, DDA Bank 1. The discrepancy involved tens of millions of
dollars, with each party claiming the other’s ledger was wrong.
Mass Account Openings
Without Authorization
Stanley
approved opening over two million brokerage accounts without getting proper
authorization from customers, according to the complaint. Many customers
received only opt-out emails and had no idea their funds were being moved into
brokerage accounts or that they had become Synapse Brokerage customers.
“Many
end users were unaware that their funds were no longer held in a DDA Bank
account or that they were even Synapse Brokerage customers,” the complaint
states.
Out of
approximately 90,000 customers who received opt-out notices from one fintech ,
only about 29,000 opened the email and just 123 clicked on links to review the
customer agreement or terms of service. Some customers even reported the emails
as phishing attempts to their fintech providers.
Part of Broader FINRA
Crackdown
The Synapse
case comes during a period of heightened FINRA enforcement activity across the
financial sector. Just weeks ago, the regulator launched a probe into Morgan
Stanley’s anti-money laundering controls, examining AML procedures across the
bank’s wealth and trading units. The investigation uncovered data quality
issues, with employees raising concerns about incomplete information initially
sent to regulators.
Earlier
this year, FINRA hit Robinhood with a $29.75 million penalty, its second major
fine since the GameStop trading chaos of 2021. The trading app must pay $26
million in fines plus $3.75 million in customer restitution, highlighting the
platform’s ongoing compliance struggles five years after the meme stock frenzy.
Interactive
Brokers also faced regulatory action, agreeing to pay $2.25 million to settle
charges over “4.2 million free-riding cases” where the broker failed
to detect prohibited transactions.
The Collapse Unfolds
The
situation deteriorated in May 2024 when DDA Bank 1 stopped processing
transactions for Synapse Brokerage customers after Synapse Fi filed for
bankruptcy . Customer funds at a second partner bank were also frozen.
Regulators
say Stanley knew about the ledger disputes but continued allowing Synapse Fi
employees to control customer account records and fund transfers. The complaint
alleges over $85 million in customer funds were reallocated between accounts in
April 2024 without customer permission through what amounted to accounting
entries rather than actual fund transfers.
Some
customers affected by the freeze have been unable to pay medical expenses,
mortgages, and college tuition, according to the filing.
Record-Keeping Violations
Surface
Paverman
faces separate charges for record-keeping failures. The complaint alleges
Synapse Brokerage failed to preserve email communications for three of eight
registered employees and didn’t maintain instant message records at all.
Paverman also allegedly provided false information to FINRA in 2023, claiming
the firm had independent access to its records when it actually relied on its
parent company.
Similar
record-keeping violations have been a focus of recent FINRA actions. The
regulator fined US Tiger $250,000 and TradeUP $700,000 for using messaging
platforms that deleted communications early, while H2C Securities paid $250,000
for failing to preserve over 1.25 million messages.
Synapse
Brokerage was expelled from FINRA membership in June 2025 for failing to
maintain required filings. Stanley is no longer registered with any financial
firm, while Paverman remains registered with five other member firms.
Customers
have gradually regained access to some funds. Program Bank deposits were
returned by June 2024, and DDA Bank 1 began releasing funds in November 2024.
However, customers whose funds were allocated to DDA Bank 1 have only recovered
a fraction of their deposits due to the ongoing ledger discrepancy.
The
Department of Enforcement is seeking monetary sanctions and other penalties
against both executives.
Financial
regulators have filed charges against two former executives of Synapse
Brokerage, alleging their failures led to over $100 million in customer funds
being frozen and inaccessible for months.
The
Financial Industry Regulatory Authority (FINRA) charged Jeffrey Stanley, the
firm’s former CEO, with failing to properly supervise a cash management program
that ultimately left millions of customers unable to access their money. Mark
Paverman, the former chief compliance officer, faces charges for failing to
maintain required records and providing false information to regulators.
Banking-as-a-Service Model
Under Scrutiny
The case
centers on what regulators describe as a flawed
“banking-as-a-service” arrangement between Synapse Financial
Technologies and partner banks. By September 2023, the platform had grown to
handle over $2 billion in customer deposits across millions of accounts.
Problems
emerged when Synapse Fi couldn’t reconcile its records with those of one of its
banking partners, DDA Bank 1. The discrepancy involved tens of millions of
dollars, with each party claiming the other’s ledger was wrong.
Mass Account Openings
Without Authorization
Stanley
approved opening over two million brokerage accounts without getting proper
authorization from customers, according to the complaint. Many customers
received only opt-out emails and had no idea their funds were being moved into
brokerage accounts or that they had become Synapse Brokerage customers.
“Many
end users were unaware that their funds were no longer held in a DDA Bank
account or that they were even Synapse Brokerage customers,” the complaint
states.
Out of
approximately 90,000 customers who received opt-out notices from one fintech ,
only about 29,000 opened the email and just 123 clicked on links to review the
customer agreement or terms of service. Some customers even reported the emails
as phishing attempts to their fintech providers.
Part of Broader FINRA
Crackdown
The Synapse
case comes during a period of heightened FINRA enforcement activity across the
financial sector. Just weeks ago, the regulator launched a probe into Morgan
Stanley’s anti-money laundering controls, examining AML procedures across the
bank’s wealth and trading units. The investigation uncovered data quality
issues, with employees raising concerns about incomplete information initially
sent to regulators.
Earlier
this year, FINRA hit Robinhood with a $29.75 million penalty, its second major
fine since the GameStop trading chaos of 2021. The trading app must pay $26
million in fines plus $3.75 million in customer restitution, highlighting the
platform’s ongoing compliance struggles five years after the meme stock frenzy.
Interactive
Brokers also faced regulatory action, agreeing to pay $2.25 million to settle
charges over “4.2 million free-riding cases” where the broker failed
to detect prohibited transactions.
The Collapse Unfolds
The
situation deteriorated in May 2024 when DDA Bank 1 stopped processing
transactions for Synapse Brokerage customers after Synapse Fi filed for
bankruptcy . Customer funds at a second partner bank were also frozen.
Regulators
say Stanley knew about the ledger disputes but continued allowing Synapse Fi
employees to control customer account records and fund transfers. The complaint
alleges over $85 million in customer funds were reallocated between accounts in
April 2024 without customer permission through what amounted to accounting
entries rather than actual fund transfers.
Some
customers affected by the freeze have been unable to pay medical expenses,
mortgages, and college tuition, according to the filing.
Record-Keeping Violations
Surface
Paverman
faces separate charges for record-keeping failures. The complaint alleges
Synapse Brokerage failed to preserve email communications for three of eight
registered employees and didn’t maintain instant message records at all.
Paverman also allegedly provided false information to FINRA in 2023, claiming
the firm had independent access to its records when it actually relied on its
parent company.
Similar
record-keeping violations have been a focus of recent FINRA actions. The
regulator fined US Tiger $250,000 and TradeUP $700,000 for using messaging
platforms that deleted communications early, while H2C Securities paid $250,000
for failing to preserve over 1.25 million messages.
Synapse
Brokerage was expelled from FINRA membership in June 2025 for failing to
maintain required filings. Stanley is no longer registered with any financial
firm, while Paverman remains registered with five other member firms.
Customers
have gradually regained access to some funds. Program Bank deposits were
returned by June 2024, and DDA Bank 1 began releasing funds in November 2024.
However, customers whose funds were allocated to DDA Bank 1 have only recovered
a fraction of their deposits due to the ongoing ledger discrepancy.
The
Department of Enforcement is seeking monetary sanctions and other penalties
against both executives.
