FTX owned small bank in Washington
More questions have been raised about FTX after it was discovered that the defunct cryptocurrency powerhouse had an $11.5 million interest in one of the smallest banks in the United States, more than doubling the bank’s prior net worth.
John Widman, the company’s then-president, told the newspaper that the company had stopped issuing mortgage loans because the documentation required too much labour. The bank didn’t even issue credit cards or offer online banking.
More Concerns raised about FTX’s Operations
This relationship between the bank and FTX’s demise has contributed to new inquiries regarding the exchange and its operations. They include: How well-integrated into the main financial system is the Bahamas-based FTX? What else could the authorities have missed?
The cryptocurrency company’s bankruptcy case brought to light FTX’s investment, which raises questions about its financial planning.
The farmers’ bank and the cryptocurrency exchange started working together in March of this year after Alameda Research, FTX’s sister firm, invested in Farmington’s parent company, FBH. Ramnik Arora, a Sam Bankman-inner Fried’s circle member who frequently oversaw considerably bigger transactions, was in charge of the purchase.
Out of 4,800 American banks, it was the 26th smallest at the time. FTX’s investment was more valuable than the bank, with a net worth of $5.7 million.
About Farmington
Farmington’s bank had about $10 million in deposits over a ten-year period. According to FDIC figures quoted by the Times, deposits increased to $84 million in the third quarter of this year, with just four accounts accounting for 85% of that total.
The bank is currently known online as “Moonstone Bank,” a name registered as a trademark a few days before FTX’s investment. Moonstone says it intends to “promote the emergence of next-generation finance,” yet it does not mention cryptocurrencies.
Farmington is connected to various crypto networks. FBH purchased the bank in 2020. In addition to serving as chairman of Deltec Bank, which, like FTX, has its headquarters in the Bahamas, Inspector Gadget co-creator Jean Chalopin is also the chairman of FBH. Tether, a cryptocurrency company with $65 billion in assets that offer a stablecoin anchored to the dollar, is Deltec’s most well-known client.
Tether has had financial difficulties for a long time due to its reclusive founders and offshore bank accounts. There were concerns that the stablecoin would be associated with FTX’s fraudulent actions without anyone being aware of it because FTX was one of Tether’s major trading partners through Alameda.
Before the merger, Farmington’s deposits had been steady at roughly $10 million. But in the third quarter of this year, the bank’s deposits rose by about 600% to $84 million. Just four new accounts, or $71 million, or roughly the entire increase, according to data from the F.D.I.C.
Did FTX Acquire a Banker’s License Legally?
What FTX had in mind for Farmington is unclear, and Farmington is currently known as Moonstone. However, it’s not certain how FTX secured a bank license in the US, which would demand the endorsement of federal regulators. Experienced banking professionals find it hard to believe that authorities would have knowingly allowed FTX to acquire a U.S. bank license.
Concerns have been raised over how FTX obtained federal approval to acquire its Farmington stake. Banking industry professionals told the New York Times that it was unlikely that regulators would have willingly permitted the cryptocurrency firm to act in this manner.
FTX and Moonstone did not respond immediately to a comment request made outside of regular US business hours.
