Executives at Synapse Brokerage Indicted for Imposing Over $100 Million Customer Fund Lockdown

In a series of recent developments, financial regulatory authorities have been cracking down on SynapseBrokerage and its associated entities.

Jeffrey Stanley, former CEO of SynapseBrokerage, faces charges from the Financial Industry Regulatory Authority (FINRA) for failing to properly supervise a cash management program. Additionally, Stanley is accused of approving over two million brokerage accounts without obtaining customer authorization.

Mark Paverman, the former chief compliance officer of SynapseBrokerage, is also under scrutiny. Paverman faces charges for failing to maintain required records and providing false information to regulators. FINRA has fined Paverman for these transgressions.

The case against SynapseBrokerage centers on a flawed "banking-as-a-service" arrangement between Synapse Financial Technologies and partner banks. This arrangement led to a discrepancy in records, which caused DDA Bank 1 to stop processing transactions for Synapse Brokerage customers in May 2024, resulting in a significant loss of funds. Regulators allege that over $85 million in customer funds were reallocated between accounts in April 2024 without customer permission.

The problem emerged when Synapse Fi couldn't reconcile its records with those of one of its banking partners, DDA Bank 1, leading to tens of millions of dollars in discrepancy. As a result, customer funds at a second partner bank were also frozen.

The Synapse case comes during a period of heightened FINRA enforcement activity across the financial sector. FINRA has fined US Tiger $250,000 and TradeUP $700,000 for using messaging platforms that deleted communications early. H2C Securities paid $250,000 for failing to preserve over 1.25 million messages.

Moreover, FINRA has launched a probe into Morgan Stanley's anti-money laundering controls. FINRA fined Robinhood with a $29.75 million penalty earlier this year, its second major fine since the GameStop trading chaos of 2021.

The fallout from these regulatory actions has affected many customers. Some customers affected by the freeze have been unable to pay medical expenses, mortgages, and college tuition. Only about 29,000 out of approximately 90,000 customers who received opt-out notices from Synapse Brokerage opened the email and just 123 clicked on links to review the customer agreement or terms of service.

Synapse Brokerage was expelled from FINRA membership in June 2025 for failing to maintain required filings. It's important to note that there are no search results directly linking a fintech company involved in the financial crisis at SynapseBrokerage with the loss of membership at FINRA.

These developments serve as a reminder of the importance of transparency and proper record-keeping in the financial industry. It's a call for all financial institutions to ensure they are maintaining their regulatory obligations to protect their customers' funds and maintain public trust.