LCG’s FCA-Regulated Entity Is Up for Sale

The liquidators of the now-bankrupt FlowBank issued a circular yesterday (Wednesday), revealing that they are seeking to sell the entire stake of London Capital Group’s (LCG) UK unit while planning to discontinue the operations of the sister entity in the Bahamas.

“In respect of LCG UK, the liquidators are currently seeking a potential purchaser who would be interested in acquiring all the shares in LCG,” the liquidators from Walder Wyss Ltd stated, adding that “in respect of LCG Bahamas, the liquidators wish to discontinue the operation of LCG Bahamas.”

Repayment to the Creditors in Process

Switzerland’s Financial Market Supervisory Authority (FINMA) revoked FlowBank's operational license on 13 June 2024 and initiated bankruptcy proceedings against the company. Geneva-based FlowBank operated as an online brokerage.

The harsh regulatory action came as the regulator scrutinised the company from October 2021 for breaches of supervisory laws, particularly concerning capital requirements, organisational adequacy, and risk management. Although an external auditor was appointed in October 2022, the regulator alleged that the bank continued to violate capital ratio requirements and maintain deficiencies in various areas of its operations.

In the latest circular, FlowBank had approximately 9,000 accounts holding secured deposits, totalling approximately CHF 53.5 million. The liquidators have already repaid around 5,800 accounts for a total amount of approximately CHF 45 million by the end of last week, which is about 84 percent of the total secured deposits.

Regarding the CFD accounts on FlowBank, the liquidators clarified that “the CFD Account is a separate account containing any gains or losses resulting from the closure of clients' CFD positions following the opening of the bankruptcy,” adding, “any positive balance credited to the CFD Account does not constitute a secured deposit” and only “represents an ordinary debt of the bankrupt estate.”

The Uncertain Fate of LCG

LCG is owned by FlowBank, founded by former LCG CEO Charles-Henri Sabet. Previously, LCG was part of the London Capital Group Holdings, which encountered trouble after delisting from the London Stock Exchange and NEX Exchange in 2018. That same year, Charles-Henri Sabet, then CEO, bought LCG, separating it from the troubled London Capital Group Holdings, which went into liquidation.

Sabet made structural changes in LCG's ownership after launching Switzerland-based FlowBank in 2020. Last year, the UK unit of LCG altered its business model, becoming an introducing broker for IG, once its rival company.

Following the bankruptcy of FlowBank, the UK’s Financial Conduct Authority imposed certain restrictions on the license of LCG, preventing it from onboarding new clients or accepting new client monies. However, those restrictions were lifted within a few weeks.

Meanwhile, LCG’s Bahamas entity ceased its operations and announced publicly that it had been impossible to carry out its operations following the bankruptcy of its Swiss parent. Unlike the UK entity, the Bahamas sister had close operational ties with the parent company as it “maintains funds with accounts at FlowBank SA.”