‘Serious failures’: Former Xinja CEO disqualified for eight years

Former neobank Xinja’s chief executive Eric Wilson has been disqualified from banking for eight years, following a lengthy regulatory investigation after the start-up failed and left thousands of Australians out of pocket.

The Australian Prudential Regulation Authority on Thursday said Wilson and former director Craig Swanger have been disqualified from acting as “accountable persons” of any bank for eight and 10 years respectively.

Former Xinja chief executive Eric Wilson has been disqualified from banking for eight years. Credit: Dean Richter

APRA deputy chair Margaret Cole said Wilson and Swanger failed to ensure the company had effective capital and were not “open constructive and co-operative” during the regulator’s long-running investigation.

“These were serious failures and the disqualifications … reflect the gravity of this conduct,” Cole said.

The disqualifications are the first under the Financial Accountability Regime, designed to hold directors and senior executives accountable for corporate conduct and culture failures – laws introduced after the 2018 banking royal commission.

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Xinja came to prominence in 2017 promising to shake up Australia’s banking industry, and crowdfunded tens of millions of dollars from everyday Australians to launch a high-interest-paying banking app.

However, the company’s business model failed to generate any revenue, and it haemorrhaged money through the high payments to customers, and spending on marketing and luxury offices, before the company tried to stay afloat by raising money offshore.

An investigation by this masthead in 2020 revealed Xinja had promoted a $433 million investment from Dubai firm, World Investments, as a done deal when in fact it was highly conditional and hamstrung by an audit that found serious problems with the neobank’s technology, including security risks.

After a years-long investigation, APRA found that Swanger did not act “with honesty and integrity” and “altered documents” during the investigation and misrepresented to regulators capital that the company had raised.

The regulator found that Wilson had similarly “misclassified” money raised by three investors separate to the Dubai investors and did not deal with APRA in an “open, constructive and co-operative way” about the nature of the capital raised.

Xinja became the first Australian bank to return its banking license in 2021, after it shocked customers and shareholders when it announced plans to close all bank accounts and refund customer savings because it could not raise funds fast enough to remain viable.

The company initially sought to “pivot” to building a US trading app, but these plans eventually collapsed, leaving investors out of pocket. Prior to Xinja, Wilson promoted his previous experience working for the National Australia Bank and Swanger had experience at Macquarie Bank’s chief investment officer. Both were contacted.

Early Xinja investor Thomas Murphy said Xinja’s directors were more interested in marketing and soliciting glowing media coverage than developing a sustainable business model, and the collapse opened wider questions about the regulations and transparency of unlisted banking companies. He said the outcome was “terribly upsetting” for the thousands of investors left empty-handed.

“This was going to be the showcase example of how young people were going to get into the market through crowdfunding,” he said. “For some, this would have been their first and last. They’ll never come back.”

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