FlowBank, an innovative Swiss online banking institution that provided cryptocurrency trading services, has been closed down and pushed into insolvency due to serious violations of the regulatory standards required for banking operations in Switzerland. The Swiss Financial Market Supervisory Authority made the decision to take this drastic measure as FlowBank failed to maintain the minimum capital necessary for its functions, as stated in a press release on June 13.
Unfortunately, there is no hope for a reorganization and concerns have been raised about the bank’s excessive debt. Following an investigation that revealed significant breaches in maintaining adequate capital reserves, FINMA concluded that FlowBank must be liquidated.
Established in 2020, FlowBank offered cryptocurrency trading services and served as the banking partner for Techteryx, the issuer of the stablecoin TrueUSD (TUSD). It was partially owned by CoinShares, a crypto asset management firm, and reportedly provided banking services to Binance, the largest cryptocurrency exchange globally.
FINMA assured that customers with funds up to $111,710 (100,000 Swiss francs) would be prioritized for protection, with efforts to recover these funds promptly. With total assets of $760 million (Swiss francs 680 million), over 22,000 client accounts, and a workforce of approximately 140 employees worldwide, FlowBank was a significant player in the financial market.
FlowBank had been under scrutiny by FINMA since its inception, with the regulatory body taking enforcement action in October 2021 due to serious breaches in compliance with capital requirements. An independent auditor was appointed to oversee FlowBank’s compliance journey, but further issues emerged in June 2023, prompting additional investigations by FINMA.
These investigations uncovered risky business relationships and significant transactions conducted without proper due diligence, leading to the revocation of FlowBank’s license on March 8, 2024. However, the legal impact of this ruling is pending an appeal at the Federal Administrative Court.
In light of these developments, it is crucial for customers to understand the risks associated with depositing funds on cryptocurrency exchanges and the importance of due diligence when engaging in financial transactions.