(Bloomberg) -- A new dispute between fintech middleman Synapse Financial Technologies Inc. and its database provider is threatening efforts by independent advisers to return money to millions of customers who have been cut off from their money for weeks.

Former Federal Deposit Insurance Corp. Chair Jelena McWilliams, who was brought in to unwind Synapse after the company filed Chapter 11, said Wednesday during a bankruptcy hearing that database provider MongoDB Inc. has indicated it could soon delete a cache of Synapse data. The information is needed to accurately distribute more than $100 million to impacted customers and determine the origin of an estimated $65 million to $96 million shortfall, McWilliams has said.

The dispute is the latest twist in an unfolding crisis for retail customers who used Yotta, Juno and other fintech apps that partnered with Synapse and lost access to their funds in May. During Wednesday’s hearing, Yotta and Juno users described hardships and stress they’ve been under since losing access to their money. 

One Yotta user said she was recently laid off from her tech job and could be forced to sell her home to cover mounting bills; another said she may delay her education because she needs access to the $7,000 in her account to pay college tuition.

The roughly 4 terabytes of data at risk cannot quickly be removed from MongoDB’s system and safely preserved for future use and investigation, McWilliams said in a court filing. McWilliams, who now works as a lawyer, was appointed in May by the Justice Department’s bankruptcy watchdog to take charge of Synapse and work to return funds to impacted app users.

Hard Deadline

MongoDB said in a July 2 letter made public Wednesday that the company rejects McWilliams’ contention that Synapse should have “open-ended” access to its data for as long as it takes to preserve it. MongoDB — which says it’s owed at least $140,000 — said it will only guarantee access to the data until July 7, according to the letter.

Judge Martin R. Barash warned MongoDB’s lawyer on Wednesday that the company could face significant consequences if Synapse data is deleted. The information on MongoDB’s system is Synapse property, protected by the bankruptcy court, Judge Barash said, adding that the data “better be preserved.”

“You’re playing with fire,” Judge Barash told MongoDB’s lawyer during the hearing.

Judge Barash said the bankruptcy is uniquely challenging because the money fintech app users need is in banks, not Synapse. The judge urged McWilliams and other advisers to work to unwind the problem as fast as possible, but said that’s little comfort to fintech users who don’t have access to their money they need “to pay for their lives.”

The judge urged MongoDB and Synapse advisers to resolve the dispute. McWilliams said it’s not fair MongoDB isn’t getting paid, and unfair app users can’t pay their bills, but that she’ll “do whatever it takes to preserve the data” as soon as possible.

The case is Synapse Financial Technologies Inc., 24-10646, US Bankruptcy Court for the Central District of California.

--With assistance from Claire Ballentine.

©2024 Bloomberg L.P.