So. The backing assets are known, to a first approximation, to be in the custody of Evolve, an FDIC-insured and regulated bank. Yet Synapse, the party whom users entrusted with their savings, was "forced" to transfer these assets to uninsured affiliated entities? 1/

Would you do this with your money? Is this reasonable diligence? 2/

Obviously not. Wealthy people keep conservative assets in FDIC insured titular-accounts, or TBTF institutions deemed tacitly insured. 3/

No "prudent man" consents to their assets getting swept into uninsured SPVs absent an excess return, and understanding they are taking a calculated risk on that return. 4/

Do retail customers sometimes get so swindled? Sure. They sometimes do consent to "sweeps" into underinsured money markets whose risk is inadequately compensated. But Synapse was not a retail customer. It was a professional fiduciary with other people had entrusted their lives' savings. 5/

Oops! It was a start-up! Run by a bunch of twnetty-somethings, maybe! Live and learn. Fucking no. That's why custodial finance is a sphere that requires tremendous, burdensome regulation. 6/

You don't let the backing assets become somebody else's shell game. You don't build a machine with seems through which other people's money can be exfiltrated. /fin