Sam Bankman-Fried’s Alameda Research invested $11.5M for a stake in a tiny bank in Farmington, Washington, in March 2022 just after it changed its name to Moonstone Bank.
The Federal Reserve has announced that it has taken an enforcement action against Moonstone Bank, since renamed Farmington State Bank.
The bank received money from FTX’s sister firm, Alameda Research.
Federal Reserve Board goes after Moonstone Bank
The Federal Reserve Board of the United and the Washington State Department of Financial Institutions have announced that it has taken an enforcement action against a former banking ally of the now-defunct FTX crypto exchange.
The announcement was made on Thursday, with the Fed specifically claiming that Farmington violated its commitments by abruptly changing its business plan without getting the written approval from the Board of Governors, the Reserve Bank, or the Washington State Department of Financial Institutions.
The Federal Reserve noted that the bank didn’t inform them of its intention “to pursue a strategy focused on digital banking services or digital assets.”
Farmington State Bank Bank, now called Moonstone Bank, has a history as an ally to Sam Bankman-Fried and Alameda. Back in March 2022, after the change of name, Alameda invested $11.5M.
The Federal Reserve alleged that Moonstone helped build infrastructure to “facilitate the third party’s issuance of stablecoins to the public in exchange for receipt of 50 percent of mint and burn fees on certain stablecoins, and took material steps to implement that memorandum of understanding,” the Fed said in the filing.
Though the action did not mention the specific commitment of the bank to Stablecoin issuance, a press release from Global Newswire on October 24, 2022 announced a partnership between Fluent and Moonstone following the name change. It claimed that it would issue US+ Stablecoin.
The enforcement action will ensure that the bank’s operations will wind down in a manner that the bank’s customers and their deposits won’t be affected.
Farmington State Bank “consented to the Federal Reserve order published today,” according to a Business Wire press release.
Read more: New FTX lawsuit implicates large VC firms and primary legal counsel
Moonstone or Farmington?
When the Feds seized $50M from Farmington earlier this year, they did so on the grounds that the money had been put there as part of Sam Bankman-Fried’s conspiracy to deceive customers.
In January 2023, while still called Moonstone Bank, the bank announced that it will be stopping its innovation-driven business model. It noted that the change in business model was a result of the recent events in the crypto market. It should be recalled that FTX had just crashed in November 2022.
Following the announcement, the bank changed its name from Moonstone Bank back to Farmington State Bank.
This action by the Federal Reserve represents the latest in a slew of actions against firms and investors since the collapse of FTX. Silicon Valley Bank and Silvergate Bank have also been affected by the crypto crash, with both banks shutting down operations. The Federal Deposit Insurance Corporation also shut down the operations of Signature Bank.
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