Financialregulators have filed charges against two former executives of SynapseBrokerage, alleging their failures led to over $100 million in customer fundsbeing frozen and inaccessible for months.TheFinancial Industry Regulatory Authority (FINRA) charged Jeffrey Stanley, thefirm's former CEO, with failing to properly supervise a cash management programthat ultimately left millions of customers unable to access their money. MarkPaverman, the former chief compliance officer, faces charges for failing tomaintain required records and providing false information to regulators.Banking-as-a-Service ModelUnder ScrutinyThe casecenters on what regulators describe as a flawed"banking-as-a-service" arrangement between Synapse FinancialTechnologies and partner banks. By September 2023, the platform had grown tohandle over $2 billion in customer deposits across millions of accounts.Problemsemerged when Synapse Fi couldn't reconcile its records with those of one of itsbanking partners, DDA Bank 1. The discrepancy involved tens of millions ofdollars, with each party claiming the other's ledger was wrong.Mass Account OpeningsWithout AuthorizationStanleyapproved opening over two million brokerage accounts without getting properauthorization from customers, according to the complaint. Many customersreceived only opt-out emails and had no idea their funds were being moved intobrokerage accounts or that they had become Synapse Brokerage customers."Manyend users were unaware that their funds were no longer held in a DDA Bankaccount or that they were even Synapse Brokerage customers," the complaintstates.Out ofapproximately 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 thecustomer agreement or terms of service. Some customers even reported the emailsas phishing attempts to their fintech providers.Part of Broader FINRACrackdownThe Synapsecase comes during a period of heightened FINRA enforcement activity across thefinancial sector. Just weeks ago, the regulator launched a probe into MorganStanley's anti-money laundering controls, examining AML procedures across thebank's wealth and trading units. The investigation uncovered data qualityissues, with employees raising concerns about incomplete information initiallysent to regulators.Earlierthis year, FINRA hit Robinhood with a $29.75 million penalty, its second majorfine since the GameStop trading chaos of 2021. The trading app must pay $26million in fines plus $3.75 million in customer restitution, highlighting theplatform's ongoing compliance struggles five years after the meme stock frenzy.InteractiveBrokers also faced regulatory action, agreeing to pay $2.25 million to settlecharges over "4.2 million free-riding cases" where the broker failedto detect prohibited transactions.The Collapse UnfoldsThesituation deteriorated in May 2024 when DDA Bank 1 stopped processingtransactions for Synapse Brokerage customers after Synapse Fi filed forbankruptcy. Customer funds at a second partner bank were also frozen.Regulatorssay Stanley knew about the ledger disputes but continued allowing Synapse Fiemployees to control customer account records and fund transfers. The complaintalleges over $85 million in customer funds were reallocated between accounts inApril 2024 without customer permission through what amounted to accountingentries rather than actual fund transfers.Somecustomers affected by the freeze have been unable to pay medical expenses,mortgages, and college tuition, according to the filing.Record-Keeping ViolationsSurfacePavermanfaces separate charges for record-keeping failures. The complaint allegesSynapse Brokerage failed to preserve email communications for three of eightregistered employees and didn't maintain instant message records at all.Paverman also allegedly provided false information to FINRA in 2023, claimingthe firm had independent access to its records when it actually relied on itsparent company.Similarrecord-keeping violations have been a focus of recent FINRA actions. Theregulator fined US Tiger $250,000 and TradeUP $700,000 for using messagingplatforms that deleted communications early, while H2C Securities paid $250,000for failing to preserve over 1.25 million messages.SynapseBrokerage was expelled from FINRA membership in June 2025 for failing tomaintain required filings. Stanley is no longer registered with any financialfirm, while Paverman remains registered with five other member firms.Customershave gradually regained access to some funds. Program Bank deposits werereturned 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 recovereda fraction of their deposits due to the ongoing ledger discrepancy.TheDepartment of Enforcement is seeking monetary sanctions and other penaltiesagainst both executives.This article was written by Damian Chmiel at www.financemagnates.com.