Crypto trader FTX targeted Swiss private bank before collapse

FTX's rambling crypto empire has filed for banruptcy amid claims of large-scale fraud. Copyright 2022 The Associated Press. All Rights Reserved.

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

The planned acquisition was part of an ambitious expansion drive by FTX Europe, which is part of the now-collapsed global cryptocurrency empire run by Sam Bankman-Fried, who has been charged by the United States with large-scale fraud. Bankman-Fried denies criminal intent but admits to mismanagement.

The Swiss-based FTX Europe was prepared to buy NPB for a sum in excess of CHF25 million ($27 million), according to information seen by SWI swissinfo.ch. The bank sought to play down the proposed deal that was never consummated.

“NPB held talks with FTX at the beginning of this year, which did not lead to a business relationship,” said NPB CEO Markus Ruffner. “NPB has never had a business relationship with any crypto company. NPB has zero exposure to any cryptocurrency.”

The takeover nosedived when the Swiss Financial Market Supervisory Authority (FINMA) took exception to the lack of global regulatory oversight of the rambling FTX group. FTX Europe put the takeover bid on ice in September to consider its options further, sources told SWI swissinfo.ch.

Weeks later, the Bahamas-based FTX group crashed into bankruptcy amid allegations of catastrophic mismanagement and serious fraud that threatens to consume customers’ assets. The group bankruptcy is taking FTX Europe down with it.

FINMA would not comment on individual cases but said cryptocurrency firms must meet the same standards as other entities that want to hold a Swiss banking licence.

“The requirements for a banking licence – for example, capital, liquidity, proper business conduct and appropriate organisational and risk management – must be fulfilled, regardless of the owner and the services they offer,” FINMA said in a written statement. “There are no specific or simplified conditions for crypto companies.”

Rapid expansion planned

FTX set up its European base in Switzerland in February after buying out the Digital Assets firm, which specialised in creating blockchain-compliant versions of company shares and other securities.

Having obtained a Cypriot trading licence (which has now been suspended), FTX Europe planned a rapid expansion throughout Europe and the Middle East. According to one person familiar with the plans, FTX Europe ironically wanted its own bank to minimise the risk of client funds being lost if a banking partner went bust.

Neue Privat Bank, formed in Zurich in 2001, seemed the perfect acquisition target. With CHF1.8 billion in assets under management, NPB was small enough to come with an affordable price tag.

Last year NPB started offering digital asset services to its clients via a partnership with InCore Bank, which offers financial services to other banks.

‘Crypto Nation’

Switzerland is making a conscious effort to turn itself into a leading global venue for cryptocurrency and blockchain companies.

The self-styled “Crypto Nation” has updated corporate and financial laws to embrace digital currencies and securities. FINMA has been tasked with finding the right path between encouraging innovation while protecting investors from the worst excesses of the cryptocurrency sector.

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