Moonstone Bank USA – Moonstone Bank, a digital lender with ties to FTX, announced this week that it is scaling back plans to provide banking services to industries such as cryptocurrency and cannabis.
The decision represents a sharp departure from the company’s original plans to transform the centuries-old Farmington State Bank, a tiny lender near the Washington-Idaho border, into a tech-focused financial firm.
“The shift in strategy reflects the impact of recent events in the crypto assets industry, as well as the resulting changing regulatory environment relating to crypto asset businesses,” Moonstone said in a press release.
Moonstone will rename itself Farmington State Bank after discontinuing its crypto and cannabis services, returning to its roots as a “community bank,” according to the release.
Farmington got its name from the small town of Farmington, Washington. Previously, the 1887-founded lender offered agricultural loans.
It was purchased in 2020 by FBH Corporation, which is owned by Jean Chalopin, the chairman of the Bahamas-based Deltec Bank. Tether, a cryptocurrency, is Deltec’s most well-known client. [Moonstone Bank USA]
According to the New York Times, FBH, Farmington State Bank’s parent company, received $11.5 million in venture capital funding in March from Alameda Research, the trading firm whose financial struggles have been cited as a key factor in FTX’s demise. The swift collapse of FTX in November spread throughout the crypto industry.
Moonstone obtained a banking charter by acquiring Farmington, a business licence required for U.S. financial institutions handling deposits and providing other bank-like services. Moonstone used to call itself a “chartered digital bank.”
Banking experts previously told GeekWire that regulators must conduct extensive due diligence on bank acquisitions. Given that Moonstone was partly owned offshore and was involved in cryptocurrency, they believe the transaction should have raised more regulatory red flags.
Before it began raising capital to transform into a tech-focused bank, Farmington had only three employees and was the 26th-smallest bank in the United States out of 4,800, according to The New York Times. According to the Federal Deposit Insurance Corporation, its net worth was $5.7 million, and it did not provide online banking or credit cards.
According to the Times, the bank’s deposits increased nearly 600% to $84 million in the third quarter of this year. According to the Times, four new accounts accounted for the majority of the increase.
According to Forbes, it was later revealed that Moonstone had nearly $50 million in FTX deposits.
Senators Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.) pressed US bank regulators in December to look into the ties between the banking industry and cryptocurrency firms such as Moonstone.
Joseph Vincent quietly resigned as Moonstone’s chief legal officer in January. According to his LinkedIn profile and Protos, Vincent joined Moonstone in May and left in December. He previously served as the State of Washington Department of Financial Institutions’ director of regulatory and legal affairs, and he is an adjunct professor of law at Seattle University.
Moonstone is led by CEO Gary Rever, who also serves on the board of Vermont State Bank. It was previously led by Ron Oliveira, who stepped down as CEO in August.
