A dispute between a fintech startup and its banking partners has ensnared potentially millions of Americans, leaving them without access to their money for nearly two weeks, according to recent court documents.

Since last year, Synapse — an Andreessen Horowitz-backed startup that serves as a middle-man between customer-facing fintech brands and FDIC-backed banks — has had disagreements with several of its partners about how much in customer balances it owed.

The situation deteriorated in April after Synapse declared bankruptcy following the exodus of several key partners. On May 11, Synapse cut off access to a technology system that enabled lenders, including Evolve Bank & Trust, to process transactions and account information, according to the filings.

That has left users of several fintech services stranded with no access to their funds, according to testimonials filed this week in a California bankruptcy court.

One customer, a Maryland teacher named Chris Buckler, said in a May 21 filing that his funds at crypto app Juno were locked because of the Synapse bankruptcy.

“I am increasingly desperate and don’t know where to turn,” Bucker wrote. “I have nearly $38,000 tied up as a result of the halting of transaction processing. This money took years to save up.”

Until recently, Synapse, which calls itself the biggest “banking as a service” provider, helped a wide swath of the U.S. fintech universe provide services like checking accounts and debit cards. Former partners included Mercury, Dave and Juno, well-known fintech firms that catered to segments including startups, gig workers and crypto users.

Synapse had contracts with 20 banks and 100 fintechs, resulting in about 10 million end users, according to an April filing from founder and CEO Sankaet Pathak.

Pathak didn’t immediately return an email seeking comment. A spokesman for Evolve declined to comment, instead pointing to a statement on the bank’s website that read, in part:

“Synapse’s abrupt shutdown of essential systems without notice and failure to provide necessary records needlessly jeopardized end users by hindering our ability to verify transactions, confirm end user balances, and comply with applicable law,” the bank said.

It is unclear why Synapse switched the system off, and an explanation couldn’t be found in filings.

Another customer, Joseph Dominguez of Sacramento, California, told the bankruptcy court on May 20 that he had more than $20,000 held up in his Yotta fintech account.

“We are scared that money will be lost if Synapse can not provide ledgers and documents to Evolve or Yotta to prove we are the legitimate owners,” Dominguez wrote. “We don’t know where our direct deposit has gone, we don’t know where our pending withdrawals are currently held.”

The freeze-up of customer funds exposes the vulnerabilities in the banking as a service, or BAAS, partnership model and a possible blind spot for regulatory oversight.

The BAAS model, used most notably by the pre-IPO fintech firm Chime, allows Silicon Valley-style startups to tap the abilities of small FDIC-backed banks. Together, the ecosystem helped these companies compete against the giants of American banking.

Customers mistakenly believed that because funds are ultimately held at real banks, they were as safe and available as any other FDIC-insured accounts, said Jason Mikula, a consultant and newsletter writer who has tracked this case closely.

“This is 10 million-plus people who can’t pay their mortgages, can’t buy their groceries … This is another order of disaster,” Mikula said.

Regulators have yet to take a role in the dispute, partly because the underlying banks involved haven’t failed, the point at which the FDIC would usually intervene to make customers whole, Mikula added.

The FDIC and Federal Reserve didn’t immediately return calls seeking comment.

In pleading with the judge in this case, Martin Barash, to help the impacted customers, Buckler noted in his testimonial that while he had other resources besides the locked account, others are not as lucky.

“So far the federal government is not willing to help us,” Buckler wrote. “As you heard, there are millions affected who are in far worse straits.”

Reached by phone on Wednesday, Buckler said he had one message for Americans:

“I want to make people aware: Yeah, your money might be safe at the bank, but it is not safe if the fintech or the processor fails,” he said. “If this is another FTX, if they were doing funny business with my money, then what?”

Target said Wednesday that its customers reduced spending on groceries and home goods as concern about high prices persisted last quarter.

The retailer said in its latest earnings report that overall customer traffic fell 1.9%, while the average amount that customers spent on those visits also dropped 1.9%. The company’s stock declined Wednesday morning as its profit missed Wall Street’s expectations for the first time since November 2022.

The Target earnings come amid broader concerns that U.S. consumers may be getting more discerning with their money, as savings dwindle, debt grows and prices remain high. Some CEOs of major consumer brands have warned about spending declines, though others, like executives at Sweetgreen and Delta Air Lines, have still seen growth.

On a call with reporters, CEO Brian Cornell said the company’s results reflect “continued soft trends in discretionary categories.’

He said the company wants to make sure it offers customers value and communicates that in a clear way. Target sought to get ahead of Wednesday’s report by announcing earlier this week that it would be cutting prices on thousands of items throughout its stores, including groceries and other staples.

Target remains more associated with discretionary purchases than with groceries: It only gets about 20% of its sales from food compared with rival Walmart, which draws about 60%.

As a result, it is more affected by any pullback in spending.

And even though inflation has recently shown signs of further slowing, the official 12-month rate remains above 3%, above the Federal Reserve’s 2% target.

Sales of previously owned homes fell 1.9% in April from March to 4.1 million units, on a seasonally adjusted annualized basis, according to the National Association of Realtors. The forecast had been for a slight gain.

Sales were also down from April 2023, off 1.9% from last year.

These sales are based on closings, so contracts likely signed in February and March. Mortgage rates jumped at the start of February and then held around 7% for the next two months before moving even higher in April.

“When we see these mortgage rates, which is a 300 basis point increase from pre-Covid pace, we are in a new territory as to how the lock-in effect will restrain home sales,” said Lawrence Yun, chief economist for the National Association of Realtors.

Total housing inventory at the end of April was 1.21 million units, up 9% month to month and up 16% from the year before, but still just a 3.5-month supply at the current sales pace. A six-month supply is considered balanced between buyer and seller. The supply of homes priced at more than $1 million, however, was up 34% year over year, which is why that segment of the market is most active.

Sales of homes priced below $100,000 fell 7.1% year over year, while sales of those priced over $1 million jumped 40%.

Tight supply kept prices under pressure. The median price of an existing home sold in April was $407,600, an increase of 5.7% year over year. That is another record high price for April. With multiple offers, due to strong demand, 27% of homes sold above list price.

“Home prices reaching a record high for the month of April is very good news for homeowners,” Yun said. “However, the pace of price increases should taper off since more housing inventory is becoming available.”

First-time buyers made a slight comeback, making up 33% of April sales, up from 29% the year before. The all-cash share was still relatively high, at 28% of all transactions.

Regionally, sales in the Northeast fell 4% from March and 4% from April 2023. The median price in the Northeast was $458,500, up 8.5% year over year.

In the Midwest, sales dropped 1% month to month and were also down 1% year over year. The median price in the Midwest was $303,600, up 6% from April 2023.

Sales in the South dropped 1.6% from March and 3.1% from the year before. The median price in the South was $366,200, up 3.7% from last year.

And in the West, sales were down 2.6% for the month and rose 1.3% from one year before. The median price in the West was $629,600, up 9.3% from April 2023.

Amazon is upgrading its decade-old Alexa voice assistant with generative artificial intelligence and plans to charge a monthly subscription fee to offset the cost of the technology, according to people with knowledge of Amazon’s plans. 

The Seattle-based tech and retail giant will launch a more conversational version of Alexa later this year, potentially positioning it to better compete with new generative AI-powered chatbots from companies including Google and OpenAI, according to two sources familiar with the matter, who asked not to be named because the discussions were private. Amazon’s subscription for Alexa will not be included in the $139-per-year Prime offering, and Amazon has not yet nailed down the price point, one source said.

Amazon declined to comment on its plans for Alexa. 

While Amazon wowed consumers with Alexa’s voice-driven tasks in 2014, its capabilities could seem old-fashioned amid recent leaps in artificial intelligence. Last week, OpenAI announced GPT-4o, with the capability for two-way conversations that can go significantly deeper than Alexa. For example, it can translate conversations into different languages in real time. Google launched a similar generative-AI-powered voice feature for Gemini. 

Some interpreted last week’s announcements as a threat to Alexa and Siri, Apple’s voice assistant feature for iPhones. NYU professor Scott Galloway called the updates the “Alexa and Siri killers” on his recent podcast. Many people use Alexa and Siri for basic tasks, such as setting timers or alarms and announcing the weather.

The development of new AI chatbots in recent months has increased the pressure internally on a division that was once seen as a darling of Amazon founder Jeff Bezos, according to the sources — but has been subject to strict profit imperatives since his departure. 

Three former employees pointed to Bezos’ early obsession with Alexa, describing it as his passion project. Attention from Bezos resulted in more dollars and less pressure to make a return on those funds immediately. 

That changed when Andy Jassy took over as CEO in 2021, according to three sources. Jassy was charged with rightsizing Amazon’s business during the pandemic, and Alexa became less of a priority internally, they said. Jassy has been privately underwhelmed with what modern-day Alexa is capable of, according to one person. The Alexa team worried they had invented an expensive alarm clock, weather machine and way to play Spotify music, one source said.  

For instance, Jassy, an avid sports fan, asked the voice assistant the live score of a recent game, according to a person in the room, and was openly frustrated that Alexa didn’t know an answer that was so easy to find online. 

When reached for comment, Amazon pointed to the company’s annual shareholder letter released last month. In it, Jassy mentioned that the company was building a “substantial number of GenAI applications across every Amazon consumer business,” adding that that included “an even more intelligent and capable Alexa.”

The team is now tasked with turning Alexa into a relevant device that holds up amid the new AI competition, and one that justifies the resources and headcount Amazon has dedicated to it. It has undergone a massive reorganization, with much of the team shifting to the artificial general intelligence, or AGI, team, according to three sources. Others pointed to bloat within Alexa, a team of thousands of employees.

As of 2023, Amazon said it had sold more than 500 million Alexa-enabled devices, giving the company a foothold with consumers. 

Apple, Amazon and Google were early movers with their voice assistants, which did employ AI. But the current wave of advanced generative AI enables much more creative, human-sounding interactions. Apple is expected to unveil a more conversational Siri at its annual developers conference in June, according to The New York Times. 

Those who worked on the Alexa team describe it as a great idea that may have been too early, and that it’s going to be hard to turn the ship around. 

There’s also the challenge of finding AI engineering talent, as OpenAI, Microsoft and Google recruit from the same pool of academics and tech talent. Plus, generative AI workloads are expensive thanks to the hardware and computing power required. One source estimated the cost of using generative AI in Alexa at 2 cents per query, and said a $20 price point was floated internally. Another suggested it would need to be in a single-digit dollar amount, which would undercut other subscription offerings. OpenAI’s ChatGPT charges $20 per month for its advanced models. 

Still, they point to Alexa’s installed user base, with devices in hundreds of millions of homes, as an opportunity. Those who worked on Alexa say the fact that it’s already in people’s living rooms and kitchens makes the stakes higher, and mistakes more costly if Alexa doesn’t understand a command or provides unreliable information. 

Amazon has been battling a perception that it’s behind in artificial intelligence. While it offers multiple AI models on Amazon Web Services, it does not have a leading large language model to unseat OpenAI, Google or Meta. Amazon spent $2.75 billion backing AI startup Anthropic, its largest venture investment in the company’s three-decade history. Google also has an Anthropic investment and partnership.

Amazon will use its own large language model, Titan, in the Alexa upgrade, according to a source.  

Bezos is among those who have voiced concern that Amazon is behind in AI, according to two sources familiar with him. Bezos is still “very involved” in Amazon’s AI efforts, CNBC reported last week, and has been sending Amazon executives emails wondering why certain AI startups are picking other cloud providers over AWS.

Federal Reserve officials grew more concerned at their most recent meeting about inflation, with members indicating that they lacked the confidence to move forward on interest rate reductions.

Minutes from the April 30-May 1 policy meeting of the Federal Open Market Committee released Wednesday indicated apprehension from policymakers about when it would be time to ease.

The meeting followed a slew of readings that showed inflation was more stubborn than officials had expected to start 2024. The Fed targets a 2% inflation rate, and all of the indicators showed price increases running well ahead of that mark.

“Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective,” the summary said. “The recent monthly data had showed significant increases in components of both goods and services price inflation.”

The minutes also showed “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.” Several Fed officials, including Chair Jerome Powell and Governor Christopher Waller, have said they doubt the next move would be a hike.

The FOMC voted unanimously at the meeting to hold its benchmark short-term borrowing rate in a range of 5.25%-5.5%, a 23-year high where it has been since July 2023.

“Participants assessed that maintaining the current target range for the federal funds rate at this meeting was supported by intermeeting data indicating continued solid economic growth,” the minutes said.

Since then, there have been some incremental signs of progress on inflation, as the consumer price index for April showed inflation running at a 3.4% annual rate, slightly below the March level. Excluding food and energy, the core CPI came in at 3.6%, the lowest since April 2021.

However, consumer surveys indicate increasing worries. For instance, the University of Michigan consumer sentiment survey showed the one-year outlook at 3.5%, the highest since November, while overall optimism slumped. A New York Fed survey showed similar results.

Stocks held in negative territory while Treasury yields were mostly higher following the minutes release.

Fed officials at the meeting noted several upside risks to inflation, particularly from geopolitical events, and noted the pressure that inflation was having on consumers, particularly those on the lower end of the wage scale. Some participants said the early year increase in inflation could have come from seasonal distortions, though others argued that the “broad-based” nature of the moves means they shouldn’t be “overly discounted.”

Committee members also expressed worry that consumers were resorting to riskier forms of financing to make ends meet as inflation pressures persist.

“Many participants noted signs that the finances of low- and moderate-income households were increasingly coming under pressure, which these participants saw as a downside risk to the outlook for consumption,” the minutes said. “They pointed to increased usage of credit cards and buy-now-pay-later services, as well as increased delinquency rates for some types of consumer loans.”

Officials were largely optimistic about growth prospects though they expected some moderation this year. They also said they anticipate inflation ultimately to return to the 2% objective but grew uncertain over how long that would take, and how much impact high rates are having on the process.

Immigration was mentioned on multiple occasions as a factor both helping spur the labor market and to sustain consumption levels.

Public remarks from central bankers since the meeting have taken on a cautionary tone.

Fed Governor Waller on Tuesday said that while he does not expect the FOMC will have to raise rates, he warned that he will need to see “several months” of good data before voting to cut.

Last week, Chair Jerome Powell expressed sentiments that weren’t quite as hawkish in tone, though he maintained that the Fed will “need to be patient and let restrictive policy do its work” as inflation holds higher.

Markets have continued to adjust their expectations for cuts this year. Futures pricing as of Wednesday afternoon after the release of the minutes indicated about a 60% chance of the first reduction still coming in September, though the outlook for a second move in December receded to only a bit better than a 50-50 coin flip chance.

Earlier this year, markets had been pricing in at lease six quarter-percentage point cuts.

In a move to strengthen its sports offerings, Warner Bros. Discovery has signed a five-year sublicensing deal with Disney’s ESPN to broadcast first-round and quarterfinal College Football Playoff games.

Warner Bros. Discovery’s TNT will carry two first-round games this year and next year and will add two additional quarterfinals games starting in 2026. Disney also has an option to sublicense a semifinals game to Warner Bros. Discovery starting with the third year of the deal if it chooses, according to people familiar with the matter.

Disney will keep exclusivity on the championship game throughout the terms of the contract, which runs through 2031, said the people, who asked not to be named because the details are private. Disney is paying about $1.3 billion per year for rights to the entire College Football Playoffs.

The new 12-team College Football Playoff slate debuts in December, replacing a four-team tournament that began in 2014. Under the new format, the top four teams get byes while teams seeded No. 5 through No. 12 play first-round games at the home stadium of the higher-ranked team.

ESPN will produce the games and primarily use ESPN talent for the broadcasts, which will be TNT branded, said the people familiar. As part of the sublicensing agreement, Warner Bros. Discovery is paying ESPN an average of “hundreds of millions” per year for the games over the course of five years, though less in years one and two when it only has two games per year, said the people.

“It is exciting to add TNT Sports, another highly respected broadcaster, to the College Football Playoff family,” said Bill Hancock, executive director of the College Football Playoff, in a statement. “Sports fans across the country are intimately familiar with their work across a wide variety of sports properties over the past two decades, and we look forward to seeing what new and innovative ideas they bring to the promotion and delivery of these games.”

This year’s first round of the CFP will take place on Dec. 20 and 21.

Warner Bros. Discovery plans to add the games to its Max sports tier. The company is bulking up on live sports while in the middle of a difficult negotiation with the National Basketball Association for a package of live games.

TNT has been a partner to the NBA for nearly 40 years but risks losing the games to Comcast-owned NBCUniversal and Amazon if Warner Bros. Discovery decides to forgo its matching rights, or, potentially, if the league opts to ignore those rights. (NBCUniversal is the parent company of NBC News.)

College football is one of the most popular programs on television. Michigan’s semifinals victory over Alabama last year drew an average audience of 27.2 million viewers — the most watched non-NFL sporting event since 2018.

Even if Warner Bros. Discovery loses the NBA, it will now have both CFP and the NBA until mid-2025, in addition to several weeks of games for the NCAA men’s basketball March Madness tournament, men’s and women’s soccer, NASCAR, Major League Baseball and the National Hockey League. That should help the company in its upcoming carriage renewal deals for TNT and its other cable networks.

ESPN sublicensing to Warner Bros. Discovery also keeps all of the CFP games on Venu Sports, the new sports streaming service that’s being developed by Disney, Fox and Warner Bros. Discovery and is expected to launch in the fall.