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Farmington Bank Confronts Federal Action: Alameda-Supported Financial Entity Directed to Cease Operations
Farmington State Bank is currently facing regulatory examination due to a cease and desist order from the U.S. Federal Reserve. This order, which was signed on July 18, 2023, has placed the bank’s operations under scrutiny, particularly following an $11.5 million investment from Sam Bankman-Fried’s Alameda Research in January 2022.
Farmington State Bank, also referred to as Moonstone Bank, has consented to comply with the stipulations set forth in the cease and desist order. This decision follows the joint issuance of the order by the Federal Reserve Board and the Washington State Department of Financial Institutions (WDFI) against Farmington State Bank in Farmington, Washington, along with its holding company, FBH Corporation of Baltimore, Maryland.
The investigation by regulatory bodies uncovered that Farmington had violated commitments to regulators by engaging in digital asset activities, such as issuing stablecoins, without obtaining the necessary approvals. The bank reportedly arranged to create the infrastructure for third-party stablecoin issuance in exchange for fees. Following this, Farmington modified its business model and began implementation without the required regulatory endorsements.
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The cease and desist order specifies strict requirements for Farmington. These include halting unauthorized activities, suspending dividends, safeguarding assets, and avoiding further actions without written consent from regulators. The bank has also pledged to divest all loans and deposits and to wind down its operations in accordance with the directives from the Federal Reserve and WDFI.
In a press release dated August 17, Farmington State Bank affirmed its steadfast commitment to follow the directives of the regulatory authorities. The relationship between the bank and Alameda Research’s investment is significant, with Alameda’s $11.5 million investment characterized as a “passive investor.”
The situation intensified earlier this year when it was disclosed that federal prosecutors had seized assets amounting to $697 million from Bankman-Fried, a considerable portion of which was linked to Farmington, also known as Moonstone Bank. This asset seizure was associated with the alleged misallocation of customer assets from FTX.
Farmington’s challenges contribute to a growing list of banks that have been forced to cease operations this year. Notably, these banks have varying levels of connections to FTX, Alameda Research, and Bankman-Fried, highlighting the complex interrelations within the financial sector. As Farmington State Bank navigates these regulatory challenges, its experience serves as a reminder of the critical importance of strict adherence to regulatory frameworks and compliance standards in a changing financial environment.
The post Farmington Bank Faces Fed Wrath: Alameda-Backed Financial Institution Ordered to Shut Down appeared first on BitcoinWorld.
