FlowBank, a Swiss bank with ties to the cryptocurrency industry, has been forced to shut down and declared bankrupt by the Swiss Financial Market Supervisory Authority (FINMA).
In its official statement, FINMA said FlowBank lacked “the minimum capital required for its business operations.” The bank was also found culpable of breaching the regulatory standards needed to operate as a bank.
FlowBank Forced into Bankruptcy
FINMA attributed the decision to shut down the bank to multiple violations that made FlowBank a financial risk. Besides failing to maintain the minimum capital requirements, the bank was over-indebted.
The regulator noted it has been investigating operations at the bank since 2021. The investigations concluded that the bank’s bookkeeping and financial reporting was “inaccurate and incomplete. The bank also fell short in its reporting obligations to FINMA.
FlowBank is also being accused of entering “higher-risk business relationships.” The bank processed large transactions without proper investigations and due diligence. FINMA states these relationships “represented a serious breach of the bank’s money laundering due diligence obligations.”
Following the prolonged non-compliance and the bank’s inability to comply, FINMA has now ordered the bank to shut down. The regulator also filed an order revoking the bank’s license in March this year.
FINMA further noted that there was “no prospect of a restructuring” and “the bank must be wound up.” The Walder Wyss AG law firm has been appointed liquidator to continue the bankruptcy proceedings.
A Crypto-Friendly Swiss Bank
FlowBank has ties to the cryptocurrency industry, adding to the list of traditional financial firms seeking crypto exposure. The bank started in 2020 and is backed by one of the leading firms in the crypto space, CoinShares.
Coinshares secured a 9% stake in FlowBank in 2021 for $11.8 million. In 2022, it secured an additional 10.8% stake in the bank.
Besides enjoying crypto backing, FlowBank also offers a series of crypto-related products and services. It allowed customers to buy, sell, and hold cryptocurrencies and other digital assets through bank accounts.
FlowBank also has ties with exchange giant Binance. Earlier this year, the Binance exchange announced plans to allow traders with large transactions to hold crypto assets at FlowBank.
FINMA has said that the liquidator behind the bankruptcy proceedings will repay up to CHF 100,000 in privileged client deposits. However, the future of the crypto deposits made by crypto customers has yet to be determined.
The regulatory troubles surrounding FlowBank did not start recently. FINMA first took enforcement action against the bank in October 2021 after identifying a breach of supervisory law in capital requirements.
FINMA also appointed an independent auditor to monitor the bank’s journey to compliance. The bank’s financial activities were also under investigation. The bank was found culpable of failing to abide by the set regulatory framework in these investigations.
