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We recently reported that the European Central Bank(ECB) had revoked the license of the small Turkish-controlled German Eurocity bank. The ECB confirmed this to Finanz Szene. Neither the regulators ECB and BaFin nor Eurocity explained the reasons and background. The 2021 financial statements show that Eurocity has struggled with regulatory problems since 2020. BaFin then imposed a new business ban in 2021. The bank had a connection to the Austrian secret service.
Regulatory Actions Since 2020
BaFain already imposed a large loan ban on Eurocity bank in 2020. During a special audit of Eurocity Bank ordered by the German BaFin in 2021, a ban on accepting deposits and a general ban on lending, i.e. a new business ban, was also imposed due to deficiencies identified. As a result, Eurocity‘s revenue model ceased to exist by the end of 2021 at the latest.
Despite the defacto business ban, the bank’s Board of Managing Directors and Supervisory Board continued to assume that it could continue its operations for at least 12 months from the submission date of the annual financial statements. The accumulated deficit at the end of 2021 already amounted to 33 million.
Apparently, the organization of the bank and the existing processes were in no way suitable for its business. Large loans were likely granted without sufficient checks. Massive write-downs may have been necessary for the existing loan portfolio. Whether this is also related to money laundering can only be assumed.
Eurocity‘s Frankfurt headquarters were evacuated, and cash machines were disabled the Turkish newspaper reports.
In 2022, the bank changed its name from Eurocity Bank AG to Eurocity AG and its domain from EurocityBank.de to Eurocity-ag.de. The word bank has disappeared from both. This is apparently the end of the story for now. Or not!
According to a Turkish newspaper, a BaFin-appointed trustee detected illegal transactions. The newspaper explains that Mustafa Sahin (pictured left) has legal troubles in Turkey. In 2016, Mustafa Sahin allegedly illegally sold 26 million shares of the public-listed Turkish Euro Yatirim Holding A.S. to Ege Sigorta, a company that was about to go bankrupt. He allegedly took money from the company’s safe before the government seized it.
He pledged 10 million shares of Euro Yatirim Holding to the Turkish Treasury Department for the tax debts. However, he could not come to an agreement with the Treasury and did not pay his debt.
Allegedly, a Turkish arrest warrant was issued against Mustafa Şahin, who allegedly fled to Germany with his wife.
The Turkish Control
Due to the identified significant need for risk provisioning for credit exposures, the Annual General Meeting on October 21, 2021, resolved a capital increase of €14 million to €40 million, subscribed in full by the majority shareholder Mustafa Sahin, a Turkish entrepreneur and manager residing in Istanbul.
The financial statements state that Mustafa Sahin directly holds a 77.97% share of the capital after the paid-in capital increase. In addition, he also holds shares through Euro Yatirim Holding A.S. (Euro Investments Holding). In total, Mustafa Sahin thus controls 80.21% of the Eurocity shares. The remaining shares are held by Euro Yatirim Holding A.S., Istanbul, Turkey (22.03%). Eurocity bank is a purely Turkish project. According to the financial statements, the Austrian shareholders allegedly involved do not exist.
The Austrian Secret Service Man
There has been repeated talk in the media of anonymous Eurocity shareholders. We have not been able to discover these. However, between April 2018 and June 2022, i.e. during the critical period of Eurocity, Franz Trautner, an Austrian working as a team leader for the Austrian secret service until June 2020, sat on the supervisory board and watched (or rather did not watch) over the bank’s activities.
In addition to Mustafa Sahin, Seda Sahin, who reportedly lives in Vienna, also served as a supervisory board member alongside Trautner until April 2022. She is also the managing director of Eurocity Invest GmbH in Frankfurt, Germany.
If you have any information about Eurocity bank, the acting persons, and partners, please let us know via our whistleblower system, Whistle42.