Crypto trader FTX targeted a private Swiss bank before collapsing

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FTX’s rambling crypto empire has filed for bankruptcy amid allegations of large-scale fraud. Copyright 2022 The Associated Press. All rights reserved.

Bankrupt cryptocurrency group FTX tried to buy Zurich-based Neue Privat Bank (NPB) earlier this year, but the deal was called off due to regulatory complications.

This content was published on December 16, 2022 – 10:21 December 16, 2022 – 10:21 Matthew Allen

When not covering fintech, cryptocurrencies, blockchain, banking and commerce, swissinfo.ch’s business correspondent can be found playing cricket on various grounds in Switzerland – including the frozen lake of St. Moritz.

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The planned acquisition was part of an ambitious expansion drive by FTX Europe, part of the now-collapsed global cryptocurrency empire headed by Sam Bankman-Fried, who has been accused by the US of large-scale fraud. Bankman-Fried denies criminal intent but admits mismanagement.

Swiss company FTX Europe was ready to buy NPB for more than 25 million Swiss francs ($27 million), according to information seen by SWI swissinfo.ch. The bank sought to downplay the proposed deal which was never consummated.

NPB had talks with FTX earlier this year which did not result in a business relationship, NPB CEO Markus Ruffner said. NPB has never had a business relationship with a crypto company. NPB has no exposure to any cryptocurrencies.

The takeover plunged when the Swiss Financial Market Supervisory Authority (FINMA) took offense to the lack of global regulatory oversight of the rambling FTX group. FTX Europe suspended the takeover bid in September to further examine its options, sources told SWI swissinfo.ch.

Weeks later, Bahamas-based FTX Group filed for bankruptcy amid allegations of catastrophic mismanagement and serious fraud that threatens to consume client assets. The bankruptcy of the group drags with it FTX Europe.

FINMA would not comment on individual cases, but said cryptocurrency firms must adhere to the same standards as other entities seeking to hold a Swiss banking license.

The requirements of a banking license, for example, capital, liquidity, proper conduct of business and appropriate organizational and risk management must be met, regardless of the owner and the services it offers, said the FINMA in a written press release. There are no specific or simplified requirements for crypto companies.

Rapid expansion planned

FTX set up its European base in Switzerland in February after acquiring Digital Assets, which specializes in creating blockchain-compliant versions of corporate stocks and other securities.

Having obtained a Cypriot trading license (which has now been suspended), FTX Europe has plans for rapid expansion throughout Europe and the Middle East. According to a person familiar with the plans, FTX Europe ironically wanted its own bank to minimize the risk of losing customer funds if a banking partner goes bankrupt.

The Neue Privat Bank, founded in Zurich in 2001, seemed the ideal acquisition target. With 1.8 billion francs in assets under management, NPB was small enough to offer an affordable price.

Last year, NPB began offering digital asset services to its customers through a partnership with InCore Bank, which offers financial services to other banks.

Crypto Nation

Switzerland is making a conscious effort to become a leading global location for cryptocurrency and blockchain businesses.

The so-called Crypto Nation has updated corporate and finance laws to encompass digital currencies and securities. FINMA has been tasked with finding the right path between encouraging innovation while protecting investors from the worst abuses of the cryptocurrency industry.

Some crypto companies like FTX started life in offshore destinations to avoid the demands of regulators in major financial centers. But a growing acceptance of digital currencies, combined with high-profile fraud cases and growing pressure from regulators, is forcing companies to relocate and seek licenses to operate.

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