FTX’s collapse revealed numerous skeletons in the closet of the company. One of the skeletons appeared to be U.S. Farmington State Bank, which FTX owned through a subsidiary.
The deal took place in March 2022, when Alameda Research, a small trading firm connected with FTX, invested $11.5 million in Farmington State Bank. Back then its net worth was twice as small as the amount of the investment and amounted to $5.7 million, which put the bank in the honourable 26th place in the rating of the smallest U.S. banks with just three employees on staff.
The Times reported that in the third quarter of this year, the bank’s deposits grew nearly 600% to $84 million. They claim that a majority of the increase came from just four new accounts. Farmington State Bank didn’t offer either online services or even credit cards.
FDIC Chairman Martin Gruenberg pointed out that now they are "looking closely" at Farmington State Bank, which now operates as Moonstone Bank in Washington State. Moonstone Bank, in turn, is trying to downplay the ties to the FTX subsidiary. They claim that Alameda Research has less than a 10% stake in its parent company, with no board seats and no direct involvement in management. Still, it is unclear how federal regulators allowed FTX to acquire a stake in a U.S.-licensed bank; some experts doubt that the regulators could consciously allow this to happen.
“The fact that an offshore hedge fund that was basically a crypto firm was buying a stake in a tiny bank for multiples of its stated book value should have raised massive red flags for the F.D.I.C., state regulators and the Federal Reserve. It’s just astonishing that all of this got approved.” – Camden Fine, former head of the Independent Community Bankers of America.
Now, according to Moonstone’s chief digital officer Janvier Chalopin, the bank has plans to transform into a digital-first business. They aim to offer an opportunity to trade stocks and digital assets from their accounts. To develop in this area, the bank has expanded its staff to 32 employees.