LCG Capital Markets Closes Due to FlowBank Bankruptcy

LCG Capital Markets Limited, also known by its trade name “FlowBroker,” announced today that it will cease operations. The decision comes in the wake of bankruptcy proceedings against its parent company, FlowBank SA, launched by the Swiss Financial Market Supervisory Authority (FINMA) on June 13, 2024.

FINMA‘s actions were prompted by FlowBank’s failure to meet capital requirements, maintain organizational adequacy, and fulfill disclosure and reporting obligations. According to a statement, FINMA appointed Walder Wyss SA as the bankruptcy liquidator. The liquidation process is based at FlowBanks headquarters in Geneva.

“Due to significant agreements between LCG Capital Markets Limited and FlowBank SA, the appointment of the Liquidators has currently made it impossible for LCG Capital Markets Limited to carry out its operations,” the company stated.

LCG Capital Markets Limited has cited a “Force Majeure Event” under section 25 of its Terms and Conditions, which outlines scenarios preventing the company from fulfilling its obligations. The company added, “We may, in our reasonable opinion, determine that an emergency or an exceptional market condition exists which may prevent us from performing any or all of our obligations.”

The cessation of LCG Capital Markets Limiteds operations affects its clients who maintain funds with accounts at FlowBank SA.

The downfall of FlowBank SA is rooted in a series of regulatory breaches. FINMA initially intervened in October 2021, citing serious violations of supervisory laws, particularly regarding capital requirements and risk management. Subsequent measures included appointing an independent auditor and a monitor to oversee the banks activities. Despite these efforts, FlowBank continued to violate regulatory standards, including engaging in high-risk business relationships and inadequate financial reporting.

On March 8, 2024, FINMA withdrew FlowBank‘s license, disqualifying it from conducting proper business activities. The situation worsened when the bank’s financial statements revealed breaches of minimum capital requirements, leading to the opening of bankruptcy proceedings.

FlowBank, founded in 2020 by former LCG CEO Charles-Henri Sabet, offered services including cryptocurrency transactions and had strong ties with crypto asset manager CoinShares. However, FINMAs findings of over-indebtedness and regulatory violations led to its downfall.

FlowBanks bankruptcy affects its extensive client base, holding over 22,000 accounts with assets totaling nearly CHF 680 million. While deposits up to 100,000 Swiss francs are protected, the status of crypto deposits remains uncertain.