Swiss Crypto Trading Bank FlowBank Declared Bankrupt for Massive Regulatory Breaches
Summary:
Switzerland's online bank, FlowBank, known for crypto trading services, has been declared bankrupt by financial regulator FINMA for serious breaches of banking standards, specifically lacking the required minimum capital for operations. Additionally, concerns were raised over the bank's huge debt and inability to restructure. With ties to CoinShares and Binance, FlowBank is tasked with repaying customers with up to 100,000 Swiss francs ($111,710) as a priority. The bank's license revocation ordered by FINMA in March 2024 is still awaiting legal validation in court.
Switzerland's online banking platform, FlowBank, known for its cryptocurrency trading services, has been declared bankrupt and ordered to close down by the Swiss financial oversight authority due to severe violation of operational banking standards. In a statement made by the Swiss Financial Market Supervisory Authority (FINMA) on June 13, the bank was found lacking in the minimum capital necessary for conducting its business activities. According to FINMA, there is no possibility of reorganization and concerns have risen over the bank's overwhelming debt. Last week's investigation led FINMA to conclude that the bank had failed to uphold the obligation of maintaining adequate capital, thereby demanding its dissolution.
FlowBank, which kicked off in 2020 and provided crypto trading services, was the primary financial collaborator of Techteryx, the originator of the stablecoin TrueUSD (TUSD). CoinShares, the crypto asset management company, had partial ownership of FlowBank, and it is alleged that FlowBank even supplied banking services to Binance, the global leader in crypto exchange. FINMA highlighted that customers possessing up to 100,000 Swiss francs ($111,710) will be prioritized for protection, and efforts will be mobilized to expedite the recovery of their funds. With total assets estimated at 680 million Swiss francs ($760 million), FlowBank oversees over 22,000 client accounts and employs approximately 140 staff globally.
FlowBank caught the scrutiny of FINMA just a year after its inception. In October 2021, for the first time FINMA took enforcement action against FlowBank due to serious default of supervisory law, particularly pertaining to capital requirements. One year later, an autonomous auditor was designated to oversee FlowBank's progress toward conformity. More complications emerged in June 2023, leading to the appointment of a new supervisor by FINMA to delve deeper into the bank's compliance failures. Investigation by FINMA found a string of high-risk business affiliations and large transactions carried out without adequate due diligence.
March 8, 2024, saw FINMA command the revocation of the bank's license. The decision, however, is yet to embrace legal validity as it awaits an appeal in the Federal Administrative Court.
Published At
6/14/2024 3:06:53 AM
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