The United States Federal Reserve has indicted Farmington State Bank, a former banking ally of the now-bankrupt FTX Derivatives Exchange. The enforcement motion was levied in opposition to the one-branch lender for violating a beforehand organized settlement by participating in crypto-related actions.
Farmington State Bank to Wind Down Operations
As a part of the enforcement motion, Farmington State Bank has been requested to droop its operations instantly.
This is a joint enforcement motion from the Federal Reserve Board and the Washington State Department of Financial Institutions. Hence, Farmington is barred from “making dividends or capital distributions, dissipating cash assets and engaging in certain activities” with out looking for the permission of its supervisors.
According to the printed assertion, Farmington which operates beneath its Moonstone Bank title improperly modified its enterprise plans final yr with out informing the financial institution’s supervisor, nor did it obtain approval from the suitable quarters. Instead, the Washington state-based financial institution adopted a pro-digital belongings marketing strategy.
Precisely, Farmington State Bank collaborated with a third get together to launch an IT infrastructure that helps the issuance of stablecoins. Per a assertion from the Federal Reserve, the FTX-linked financial institution engaged on this enterprise in alternate for 50% of mint and burn charges on some stablecoins.
This transfer was not in sync with the settlement that Farmington signed with the Reserve Bank in 2020 when it commenced operations as a financial institution holding firm. The financial institution had earlier agreed to maintain its distance from digital banking operations and keep away from altering its marketing strategy.
Alameda Research Owns Stake in Farmington State Bank
It is value noting that the change in marketing strategy occurred across the identical time when FTX’s sister buying and selling agency Alameda Research acquired an $11.5 million stake within the agency final yr. This funding gave Alameda a 10% stake within the establishment.
The desk turned earlier this yr when federal prosecutors seized $50 million from Farmington citing that the funds have been deposited within the monetary establishment as a part of Sam Bankman-Fried‘s scheme to defraud clients.
This pressured the FTX-linked financial institution to surrender on crypto in the beginning of 2023 and return to its “roots”.
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