Swiss Regulator Shuts Down Crypto Friendly FlowBank, Begins Bankruptcy Procedures

Switzerland-based crypto-friendly bank FlowBank has begun bankruptcy proceedings after regulators said it lacked operating capital. FlowBank reportedly had affiliations with Techteryx, the issuer of stablecoin TrueUSD, and allowed customers to trade cryptocurrency.

However, Switzerland’s Financial Marker Supervisory Authority (FINMA) says it found the online bank unfit to operate as a bank.

FlowBank Shutdown Operations, Bankruptcy in Process

In a June 13 announcement, FINMA said it is shutting down FlowBank because it lacks sufficient capital to operate its business. The Swiss regulator also revealed that FlowBank seriously breached standard bank operating obligations.

As such, the regulator insisted the bank must be shut down as it is not worth restructuring, citing concerns about its over-indebtedness. Following this development, the regulator opened bankruptcy proceedings against FlowBank. It claims the move is necessary to protect depositors from losing funds due to FlowBank’s supposed insolvency. 

Notably, FlowBank has over 22,000 client accounts and up to 140 employees globally. The Swiss bank boasts total assets of 680 million Swiss francs (~$760 million).

FINMA says it will prioritize FlowBank customers whose funds are up to 100,000 Swiss francs (approximately $111,710). The aim is to help customers recover their funds as quickly as possible.

Meanwhile, in a June 13 letter addressed to customers, FlowBank said FINMA decided to shut down the bank on June 12, effective June 13 at 8:00 a.m. 

Also, FINMA has withdrawn FlowBank’s licensestopping it from operating as a securities dealer and bank. Following the opening of the bankruptcy proceedings, all bank activities have been halted. Customers can no longer deposit, withdraw, buy, or sell securities.

FINMA also appointed the top Swiss law firm, Walder Wyss, as the bank’s bankruptcy liquidator.

FlowBank’s Regulatory Woes 

Launched in 2020, FlowBank, partly owned by crypto asset manager CoinShares, opened its doors to customers and allowed crypto trading activities. The bank partnered with TrueUSD stablecoin issuer Techteryx.

Earlier this year, reports surfaced about FlowBank offering banking services to Binance customers. FlowBank’s woes began in October 2021, when FINMA brought an enforcement action against it, citing “serious breaches of supervisory law.” 

The regulator also said the bank does not meet the minimum capital requirements to operate its business. Twelve months later, FINMA appointed an independent auditor to monitor the bank’s compliance. 

In June 2023, the regulator also assigned another supervisor to oversee FlowBank’s financial activities and investigate its compliance defaults. FINMA said it discovered countless high-risk business deals and large transactions processed without proper due diligence following the investigation.

Further, on March 8, 2024, the regulator sent an order to withdraw FlowBank’s license. However, the ruling remains unofficial, pending FlowBank’s appeal at Switzerland’s Federal Administrative Court. 

While the bankruptcy case continues, it remains uncertain whether FlowBank’s crypto customers will retrieve their deposits. FINMA said it was the liquidator’s decision whether to classify the cryptocurrencies as custody assets to be treated as securities or bank claims. 

Besides the clients’ letter released on its website, FlowBank has yet to comment on the matter. The bank’s X account has also been deactivated.