Fallen neobank Xinja returns customer deposits

Fallen fintech Xinja has become the first Australian bank to return all customer deposits, finalising the closure of its savings accounts more than a month after it made the shock announcement to exit banking.

The Australian Prudential Regulation Authority announced on Tuesday Xinja had returned $252 million in deposits to 37,884 customers and the remaining $65,908 would be transferred to the National Australia Bank for collection.

Xinja has become first Australian bank to return all customer deposits. Credit:Dominic Lorrimer

Xinja will relinquish its banking license formally within the next few weeks, APRA said.

"Xinja customers whose deposits have been transferred to NAB can elect to leave their funds there, or transfer them to another bank of their choice," the regulator said. "This was the first time an Australian ADI had undertaken a return of deposits to its customers."

APRA said it had "closely monitored" the return of deposits process since Xinja blamed COVID-19 and a tough capital raising environment for its decision to exit banking and focus on its US share trading platform.

Xinja’s auditors found the bank had temporarily breached APRA’s minimum capital requirements and warned of a reliance on "injections of additional capital" to remain operating lawfully.

The bank burnt through cash since it was granted a banking license by APRA in September 2019 by offering customers high interest savings accounts without any revenue through lending facilities.

Xinja had told customers and shareholders it had secured a $433 million deal from Dubai-based World Investments in March but receipt of this money was delayed and has yet to materialise.

That deal is now being probed by an anonymous US group offering cash rewards of up to $1 million and whistleblower protection in exchange for insider information about Xinja, and its dealings with World Investments or First Penny Investment's chief executive Michael Gale – who was celebrated at the time for brokering the deal.

Mr Gale operates his capital advisory firm outside of Byron Bay co-working space Habitat and charges start-up founders for advice and access to investors. The serial entrepreneur has a string of soured business deals behind him, including one with Seek co-founder Matt Rockman.

Xinja told shareholders on New Years Eve shares in the company could be “close to or actually” worth zero as it had so far struggled to establish a pathway to expand its business.

Shareholders are bracing for the company to go into voluntary administration. A spokesman would not disclose how much capital it retained.

"The board is monitoring this closely and will continue to act in line with their obligations and duties," the spokesman said when asked if it would go into voluntary administration.

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