Keystone Law’s financial services partners Simon Deane-Johns and Simon Jackson are advising a creditor involved in the administration of UAB Payrnet. This failed e-money institution that was formerly a subsidiary of failed Railsbank Technology Ltd and host of the old EU-based Wirecard prepaid programmes. The case has been the subject of a Regulatory Intelligence report, published by Thomson Reuters.

A key issue in the Lithuanian administration proceedings is whether the ‘asset pool’ available to the administrator of UAB Payrnet extends to money held with Payrnet Ltd, a UK e-money institution in the Railsbank group.

According to the Lithuanian regulator, UAB Payrnet appears to have held its customer funds with Payrnet Ltd under a controversial ‘intra-group’ arrangement. “Instead of keeping the funds in a dedicated account of a credit institution or central bank, it kept funds at another electronic money institution,” the Bank of Lithuania said, according to the Thomson Reuters report.

The former group’s parent company, Railsbank Technology Ltd, entered administration in 2023. In March of that year, an arranged ‘pre-pack’ arrangement saw the FCA approve the change in control over Payrnet Ltd to a newly funded parent, Embedded Finance Ltd. UAB Payrnet was omitted from that deal and was then under restrictions imposed by the Lithuanian regulator. Its e-money authorisation was later revoked by the Bank of Lithuania.

The administrator’s case is being heard in Vilnius County Court in Lithuania, with an initial decision expected on 8 July 2024.

Simon Deane-Johns said:

“The rarity of an electronic money institution abandoned to its fate in the insolvency courts highlights the significance of this case for not only creditors concerned, but also the safeguarding structures of prepaid card programmes throughout Europe and the UK.

“The asset pool available to the administrator should include both relevant funds that were appropriately safeguarded, as well as sums equal to relevant funds that should have been – but were not – safeguarded in compliance with the regulations implementing the E-money Directive.”

To read an analysis of the issues raised in this case, click here.

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