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An advanced digital platform, reduced administrative fees, lenient compliance, and a decentralized business model: this was Migom Bank, a Dominica-incorporated fintech startup and one of the first Caribbean banks to merge with a US holding company. Migom rode the crest of the COVID-era fintech wave, with a market capitalization of more than $750 million.
This neobank offered a full suite of e-banking services to mid-sized businesses, individuals and companies in emerging markets, such as international payment settlements and OTC operations in crypto, multiplying its revenues, and attracting a large customer base from underbanked niches like gaming and crypto. In less than three years from the bank’s inception, Migom was already eyeing elevation of its listing to NASDAQ.
In late 2022 though, there was an abrupt end to Migom’s meteoric rise. Operations froze, the holding company became mired in a liquidation process, and clients demanded their money back. The bank’s support team maintained a positive tone but even they eventually halted all communications. Today, Migom Bank is all but under the special supervision of Dominica regulators.
The First Symptoms
It is difficult to find any official communication regarding Migom’s current affairs. The US-based Migom Global Corp stopped reporting to the SEC in late 2022. The bank made no press releases, and their customer service is unresponsive. Even their website provides no hints about the bank’s operational roadblock.
The likely trigger for this silence is traceable. The Swiss-based InCore bank, which specializes in providing outsourced financial services and licensing shells to fintech companies, terminated the corresponding account agreement after reevaluating its compliance policies. This left Migom with no operating accounts outside digital money. The entity’s backup plan, the Lithuanian EMI Transactive Systems UAB, also fell through after increased scrutiny from the local monetary authorities. Migom’s last resort was its ambitious investment in the troubled Latvia-based Baltic International Bank, but that bet also failed.
Migom faced intense and frequent problems that were out of their control, yet options remain to pivot out of these crises. The bank could have secured new corporate relationships, raised capital to compensate for the locked assets from the liquidation process, or filed for bankruptcy protection amidst the growing deposit mismatch.
A Timeline of Missteps
The first blow to Migom was to its corresponding accounts. Providing low-threshold compliance may attract a steady influx of clientele, but more stringent jurisdictions than Dominica are likely to find this practice troublesome. Migom’s corporate clients involved companies that simply froze corporate accounts to eliminate unwanted business.
Then came the managerial issues in the bank’s internal structuring. The well-established decentralized business model was discarded in favor of hasty consolidation to accelerate the NASDAQ listing. The president of Migom Bank acquired a controlling stake in Migom Global Corp as it was believed at the time that the holding company was soon to be listed on NASDAQ.
Nevertheless, at the beginning of 2023, the Caribbean bank ran out of money, froze its departments, faced operational roadblocks, and was unable to attract new customers.
Restructuring Is Inevitable
Migom’s struggles will come to an end in the near future, one way or another. Despite evident issues and an ongoing split between the US and European teams, Migom still has ways to pull out of their current downward spiral.
Dominica’s regulatory authorities took notice of the beleaguered bank and imposed administrative controls on it. The crisis management team developed a restructuring plan, pushed forward more conservative business strategies, negotiated a comprehensive bailout, and sought new capital from private investors.
The bank needs to stick to these revival plans, and Migom bank has to establish communication with the it’s customers.
Migom will inevitably restructure. The question is how long the process of restoring deposits will take, and the answer to that question is exclusively in the hands of the bank’s management.
