The Federal Reserve has taken action against a small bank in Washington state with links to the failed crypto firm FTX.
Late last week the Fed published a ‘cease and desist’ order against Farmington State Bank to ensure an orderly wind-up of the company.
It follows an investigation by the Fed and Washington’s banking regulator that found Farmington — which previously traded as Moonstone Bank — had violated binding commitments not to change the bank’s business model, by entering into crypto markets.
Farmington had entered into “a non-binding memorandum of understanding” with a third party to develop infrastructure and help facilitate the creation of stablecoins, according to the Fed’s notice. This was significantly outside of the bank’s longstanding remit as a local community bank, the regulators said.
Farmington’s parent company, FBH Corporation, received an $11.5 million investment from Alameda Research Ventures in March 2022. Alameda Research Ventures was closely linked to FTX and its CEO and co-founder Sam Bankman-Fried.
It dropped the Moonstone brand earlier this year and pledged to exit crypto markets entirely.
The company has subsequently entered into an agreement to sell its loans and deposits to the Bank of Eastern Oregon. The cease-and-desist notice is designed to ensure that Farmington is wound up in an orderly manner and the deposits and loans are transferred without posing a risk to the Deposit Insurance Fund.
In a brief statement, Farmington said it had consented to the Fed’s order and all necessary approvals had been received for the sale of assets and transfer of deposits. The transaction is expected to complete by August 31.