The Geneva-based digital bank, closed by the Swiss Financial Market Supervisory Authority (Finma) in June, is fighting back. According to media reports from the weekend, the bank has filed a lawsuit against Finma with the Federal Administrative Court. The case likely centers on why the supervisory authority rejected a last-minute capital commitment arranged by the bank, which, according to «SonntagsZeitung,» came from a company associated with the cryptocurrency exchange Binance.

The forced closure of the bank, led by flamboyant founder Charles-Henri Sabet until the end, is often cited as evidence that Finma, under new leadership by Stefan Walter, has adopted a stricter stance, particularly toward the cryptocurrency sector. While it’s possible that Finma is tightening its regulatory grip, the Flowbank case may not be the best example to support this argument.

Is it Part of the Crypto Ecosystem?

First, the fact that Flowbank was a digital bank doesn’t automatically make it a relevant part of the crypto ecosystem.

Second, even if it were considered part of the ecosystem, it’s worth noting that Finma has been critically monitoring the young and dynamic crypto industry for years.  This oversight is fundamentally beneficial, both for investor protection and for the industry's long-term interests. This sentiment is echoed in an interview with finews.ch by Franz Bergmüller, CEO of the crypto bank Amina, who remarked: «We are closely supervised because there is still concern that services around cryptocurrencies could be misused for fraud, money laundering, or even terrorist financing.»

A Long Record of Missteps

Moreover, regardless of whether Flowbank is part of the crypto universe or whether the message is directed at the entire sector, the list of serious violations that Finma has repeatedly uncovered at the institution is so long that it’s understandable why the authority eventually ran out of patience—regardless of the type of bank involved.

Flowbank is currently in liquidation, and information for customers and creditors can be found on its website. The liquidator, Walder Wyss, is responsible for distributing funds to Flowbank’s 12,000 customers, preparing the schedule of claims (due for publication in the fall), and liquidating the bank's assets.

Most Privileged Deposits Repaid

According to a report by «Le Temps» on Monday, 60 employees (down from an initial 140) are still handling the liquidation process at Flowbank’s headquarters in a high-rise in Lancy, near Geneva, which the bank had only moved into on March 1. The Zurich office has apparently been relocated to Geneva as well.

The report states that most customers have already received the funds protected by the Swiss deposit insurance system, Esisuisse, which covers up to 100,000 francs. A total of 44.6 million francs, or 84 percent of these priority claims, has been repaid. However, 8 million francs has yet to be distributed, as roughly 3,000 customers have not responded or have failed to contact the bank.

Lengthy Process for Securities Reimbursement

According to a report by the business newspaper «L'Agefi,» which visited the site and whose reporting Flowbank unsuccessfully contested in court (as also reported by finews.ch), the process of returning securities held by Flowbank customers—assets that are not part of the bank’s balance sheet—is proving to be time-consuming.

According to the liquidator, processing times are taking “several weeks or even months.” He has suggested that investors sell their securities and have the proceeds returned to them in cash rather than transferring them to other banks' deposit accounts.

Although securities remain legally owned by the customer and do not belong to the bank, the Flowbank case highlights the risks that clients may face with their securities during bankruptcy. While they won’t lose their securities, they should be prepared for potential delays of several weeks before regaining full access.