During its bankruptcy proceedings, cryptocurrency exchange FTX has been found to have engaged in several unethical practices. Concerns have been renewed over its operations and alleged misuse of banking loopholes following the latest disclosure regarding its stake in one of the smallest United States banks from rural Washington.
Formerly known as Farmington State Bank, the institution has since changed its name to Moonstone and is now the United States twenty-sixth-smallest bank, with just one location and three employees. In March of 2022, FTX invested $11.5 million in the rural bank’s parent company, FBH, through its now-defunct sister company, Alameda. According to The New York Times, the $5.7 million bank was worth more than double after the Alameda investment.
Many see FTX’s acquisition of Moonstone as an attempt to sidestep the arduous process of obtaining a U.S. banking license. Given the difficulty in obtaining a banking license, one Reddit user suggested that “buying a small bank is often a back door to getting a license,” adding that this “would be a natural part of a business plan for something like FTX.”
One more user brought up the lack of regulatory oversight on cryptocurrencies and the possible abuse of banking loopholes. One user commented, “With the amount of political connections SBF had, I would not be surprised either if he just got that license for no reason.” Other users also theorized that Sam Bankman-political Fried’s connections may have played a role in the deal.
The crypto community wasn’t as interested in FTX’s stake in a U.S. bank as they were in the relationship between the parent company of the rural bank, FBH, and Tether, the largest issuer of a stablecoin in the crypto market at the moment.
Jean Chalopin, chairman of FBH and Deltec Bank, whose clients include Tether and Alameda, is also chairman of Deltec Bank. Nearly a century after its founding, in 2020, FBH purchased the bank and sought Federal Reserve approval to begin processing cryptocurrency transactions. In June of 2021, the bank was granted federal approval, and by September of that year, FTX had invested in the rural bank that had just received its Federal Reserve charter.
As Tether has long been under scrutiny for reserve audits, the banking connection between Tether and FTX/Alameda became a concern for many in the cryptocurrency community. Before this article’s publication, NFT Today Magazine had yet to hear back from Tether regarding our request for comment.
Marine Corps Veteran-turned-national-tv-personality Eric Mitchell is a world leading expert in sports media, regularly appearing on the world’s largest outlets from BBC, MSNBC, Fox News, Bloomberg, CNN and more. His signature blend of snark and industry expertise landed him columns at none other than RollingStone, GritDaily, PopWrapped, Disrupt — and most recently — Editor in Chief at NFT Today Magazine. When he’s not making media appearances or running his empire at LifeFlip Media, he can be found entertaining his thousands of loyal followers on social media through his authentic filter-free content.
