Yotta Savings

Yotta Technologies
Company typePrivate
IndustryFinancial technology
FoundedOctober 2019
FoundersAdam Moelis, Ben Doyle
Headquarters
New York City
,
USA
Key people
Adam Moelis (CEO)
ServicesPrize-linked savings account, fintech services
Websitewww.withyotta.com

Yotta Savings, incorporated as Yotta Technologies, is an American financial technology (fintech) company that offers a prize-linked savings account.

On May 11, 2024, due to the failure of Synapse, a fintech company on which Yotta depended, Yotta's customers lost access to the money held in their accounts. Because Yotta is not a bank, Yotta's customers were not entitled to deposit insurance.[1][2] As of November 2024, depositors have been offered only some of the money they had provided to Yotta.[3]

History

A Yotta Savings prize winner with a check for $37,990

Yotta was founded by Adam Moelis, the son of billionaire investment banker Ken Moelis, and Ben Doyle. The company was founded in October 2019, and its platform launched in July 2020. Early funders of Yotta include hedge fund manager Cliff Asness and Ken Moelis. In January 2021, Yotta announced that it had raised $13.2M in Series A funding, led by Base10 Partners, with additional funding from Y Combinator, Core Innovation Capital, and Slow Ventures.[4][non-primary source needed]

Yotta originally offered depositors an interest rate of 0.2%, establishing a prize pool with the remaining deposit interest, with a top prize of $10 million. The top prize was later revised to $1 million, which has never been won as of July 2023. New York Times columnist, Peter Coy, described Yotta as "a smart way to turn gambling into a virtue".[5] Customers receive sweepstakes tickets based on the size of their deposit.[6] One Yotta user won $500,000 in a September 2022 sweepstakes drawing.[7] Coffeezilla, a YouTube producer focused on financial scams, observed that Yotta had pivoted from the sweepstakes model to offering casino-style games, including blackjack, dice, and roulette games, funded by microtransactions instead of savings account deposits.[8]

The company launched an influencer marketing campaign in 2022.[9] Popular influencers helped drive growth in Yotta's customer base.[10]

Funds availability issues

Yotta relied on Synapse, a fintech company based in San Francisco, to make funds available for deposit and withdrawal to partner banks, such as Arkansas-based Evolve Bank & Trust. Following a dispute between Synapse and Evolve, Synapse filed for Chapter 11 bankruptcy protection in 2024, affecting customers of Yotta and at least 24 other startups. Adam Moelis told CNBC in June 2024 that 85,000 Yotta customers, with a combined $112 million in deposits, could not access their funds.[11] Although the partner banks had deposit insurance through the Federal Deposit Insurance Corporation (FDIC), the FDIC has not intervened, because no bank has failed.[10]

In a letter filed with a bankruptcy court on June 20, 2024, Evolve wrote that on April 11, eight banks held a total of $109 million in deposits for Yotta customers and that about a month later, one bank held $1.4 million of Yotta funds. Neither customers nor Evolve received funds in the intervening time. Moelis had said that, as of May 17, Evolve held $112 million of Yotta's customers' funds; Evolve disputes this.[12] In September 2024, Yotta sued Evolve in the United States District Court for the Northern District of California, accusing the bank of conspiring with Synapse to take Yotta's customer funds.[13]

In November 2024, 13,725 Yotta depositors said that they were being offered $11.8 million of their $64.9 million in deposits. Several depositors reported being paid less than 1% of the funds they had put into Yotta. A volunteer group, Fight For Our Funds, has been formed to advocate for additional reimbursements.[3]

References

  1. ^ Dayen, David (2024-05-23). "Fintech Fight Leads to Hundreds of Thousands of Frozen Accounts". The American Prospect. Retrieved 2024-08-28.
  2. ^ Copeland, Rob (July 9, 2024). "What Happens When Your Bank Isn't Really a Bank and Your Money Disappears?". The New York Times. Retrieved 2024-08-28.
  3. ^ a b Son, Hugh (November 22, 2024). "'I have no money': Thousands of Americans see their savings vanish in Synapse fintech crisis". CNBC. Retrieved November 22, 2024.
  4. ^ "Yotta Rewards Smart Financial Habits with a Chance to Win $10M to Encourage More Americans to Save". BusinessWire (Press release). January 28, 2021. Retrieved June 28, 2024.
  5. ^ Coy, Peter (July 28, 2023). "A Smart Way to Turn Gambling Into a Virtue". The New York Times. Retrieved June 21, 2024.
  6. ^ Basak, Sonali (September 10, 2020). "Startup Bets People Will Save Money for a Chance to Win $10 Million". Bloomberg. Retrieved June 21, 2024.
  7. ^ Gelsi, Steve (September 28, 2022). "Fintech startup Yotta customer wins $500,000 in sweepstakes drawing". MarketWatch. Retrieved June 21, 2024.
  8. ^ Findelsen, Stephen (2024-06-03). Youtuber Bank Wont Let You Withdraw Money. Retrieved 2024-07-17 – via YouTube.
  9. ^ "Yotta Launches Affiliate Program with Fintel Connect to Expand Reach of Rewards-Based Savings App". PR Newswire (Press release). Fintel Connect.
  10. ^ a b Mason, Emily (June 18, 2024). "Is Your Money Really Safe In An 'FDIC-Insured' Fintech Account?". Forbes. Retrieved June 21, 2024.
  11. ^ Son, Hugh (June 1, 2024). "Savings app CEO says 85,000 accounts locked in fintech meltdown: 'We never imagined a scenario like this'". CNBC. Retrieved June 21, 2024.
  12. ^ Son, Hugh (June 21, 2024). "Nearly $109 million in deposits held for fintech Yotta's customers vanished in Synapse collapse, bank says". CNBC. Retrieved June 21, 2024.
  13. ^ Williams, Claire (September 19, 2024). "Yotta accuses Evolve of 'grotesque misconduct' in Synapse collapse". American Banker. Retrieved September 21, 2024.