FlowBank, a Swiss online banking institution that provided services for trading cryptocurrencies, has been closed down and declared bankrupt by the Swiss financial regulatory authority due to serious breaches of operational standards required for it to function as a bank.
The Swiss Financial Market Supervisory Authority stated on June 13 that the closure was necessary as the bank did not have the minimum capital necessary to sustain its operations. There is no possibility of restructuring, with concerns that the bank is heavily indebted, according to FINMA.
Following an investigation last week, FINMA found that the bank had seriously violated its obligation to maintain adequate capital, leading to the decision to wind up the institution.
FlowBank was launched in 2020 and offered cryptocurrency trading services. It was also the banking partner for Techteryx, the creator of the stablecoin TrueUSD (TUSD). The bank was partially owned by CoinShares, a crypto asset management company, and reportedly provided banking services to Binance, the world’s largest cryptocurrency exchange.
FINMA emphasized that customers with funds up to $111,710 (100,000 Swiss francs) will be the first to be protected, and efforts will be made to help them recover their funds promptly.
FlowBank, with total assets of $760 million (Swiss francs 680 million), manages over 22,000 client accounts and has a global workforce of approximately 140 employees.
After being put on FINMA’s watchlist a year after its establishment, FlowBank faced enforcement action in October 2021 for serious breaches of supervisory laws, particularly related to capital requirements. An independent auditor was later appointed to oversee FlowBank’s compliance efforts.
Further issues arose in June 2023, leading to another investigation by FINMA, which revealed high-risk business relationships and large transactions being processed without proper due diligence.
FINMA revoked the bank’s license on March 8, 2024. However, the decision is pending appeal at the Federal Administrative Court and has not yet taken legal effect.
In a related matter, an article delves into the risks associated with depositing funds on cryptocurrency exchanges.