FlowBank forced into bankruptcy by FINMA after serious violation of minimum capital requirements.
The Swiss online bank, FlowBank, offering crypto trading services, has been forced into bankruptcy by the Swiss Financial Market Supervisory Authority (FINMA) after discovering serious violations of required banking standards.
Context and reasons for FlowBank’s bankruptcy
FlowBank, founded in 2020, offered crypto trading services and was the banking partner of Techteryx, the issuer of the stablecoin TrueUSD (TUSD). It was also partially owned by the crypto asset management company, CoinShares, and provided banking services to Binance, the largest cryptocurrency exchange in the world.
The Swiss Financial Market Supervisory Authority (FINMA) has stated that the bank had “seriously violated” the obligations to hold sufficient capital.
This measure became necessary as the bank no longer has the minimum capital required for its business operations.
FINMA
Consequences and protection of clients
FINMA emphasized that there is “no prospect of restructuring” and there are “fears that the bank is over-indebted.” As a result, the bank must be liquidated. Clients with funds up to 100,000 Swiss francs ($111,710) will be prioritized for protection, and FINMA will strive to assist clients in recovering their funds “as quickly as possible.”
FlowBank holds 680 million Swiss francs ($760 million) in total assets, has over 22,000 client accounts, and employs approximately 140 people worldwide.
History of FINMA’s actions against FlowBank
FINMA had placed FlowBank under surveillance one year after its launch. In October 2021, the regulator took enforcement measures against the bank after identifying “serious violations of supervisory law,” specifically regarding capital requirements. An independent auditor was appointed 12 months later to monitor FlowBank’s compliance.
In June 2023, FINMA designated another supervisor to oversee FlowBank’s financial activities and further investigate its compliance failures. This investigation revealed “numerous high-risk business relationships” and processing of large transactions without appropriate due diligence.
On March 8, 2024, FINMA ordered the withdrawal of FlowBank’s banking license. However, this decision has not yet taken legal effect as it is pending an appeal before the Federal Administrative Court.
