APRA bans Xinja founder from running banks for 8 years

Eric Wilson, the founder and former CEO of dead neobank Xinja, and his fellow director Craig Swanger, won’t be able to help run a bank ’til the 2030s after APRA made first use of its new financial accountability powers.

Xinja handed back its banking license in December 2020 after just three years of trying to “break the traditional banking model”.

Now Xinja’s old domain name redirects to an illicit gambling site, and Wilson and Swanger cannot be an “accountable person” of any bank for 8 and 10 years, respectively.

APRA said the disqualifications arose from investigations into the quality of Xinja’s capital during deals made between May and August 2020.

Shortly after Xinja announced raising $433 million from Emirati investors, the company struck deals with three investors for what Xinja told APRA money was primo, top shelf, pure grade CET1 capital, baby!

Financial regulators like APRA love CET1 because it has no strings attached. In regulator speak, CET1 “does not result in any repayment or distribution obligations on the institution”.

So when Xinja failed to mention all the strings (or “side agreements”) attached to its shiny new capital, APRA was poised strike the ban hammer.

“An accurate understanding of banks’ capital adequacy framework is essential for APRA to protect depositors by ensuring banks have the financial resilience to withstand a crisis,” APRA Deputy Chair Margaret Cole said in a statement.

“It is vital that accountable entities and accountable persons are open and cooperative with APRA so that it may effectively discharge its responsibilities for overseeing the safety and soundness of Australia’s financial system.”

“These individuals failed to act in accordance with their duty to ensure Xinja had effective capital in place and to be open, constructive and cooperative with APRA in reporting Xinja’s capital position.”

A step too FAR

It’s the first such disqualifications to fall under the relatively new Financial Accountability Regime (FAR).

APRA found Wilson and Swanger had breached — or poked — the menacingly named Banking Executive Accountability Regime (BEAR), which became the FAR in March 2024.

In its statement, APRA said said Wilson and Swanger did not act “with due skill, care and digilence” when Xinja raised capital that they should have known was not CET1.

When the finance cops came knocking, Wanger also tried to hide the fact their capital was cut with low grade gear.

According to Apra, he altering documents Xinja would have to hand over.

“The impact of these alterations was to remove content that showed the capital raised by Xinja was incorrectly classified as CET1 capital,” APRA said.

APRA said it hopes this case will serves as a warning to other bankers.

“APRA recognises that the actions of directors and senior executives shape the conduct and operating culture of the entities they lead,” Deputy Chair Margaret Cole said.

“Where accountable persons fall short, APRA will hold them to account.”