A November 23 article by New York Times reporter Stephen Gandel raised questions about an investment by bankrupt crypto exchange FTX into Farmington State Bank, a tiny financial institution in rural Washington state that has been serving the local community since 1887.
The $11.5 million investment in March by FTX offshore hedge fund, Alameda Research Ventures , was apparently red-flagged in part because it “was more than double [Farmington’s] net worth,” per the Times, which the FDIC estimated to be $5.7 million at the time of the investment.
Farmington State Bank itself had been purchased in 2020 by FBH Corp., a bank holding company with its own ties to the crypto world. Farmington’s online entity, Moonstone Bank – which itself was trademarked around the time of the investment and bills itself as a “Bank Built for Tomorrow” – is now the face of the financial institution, which is regulated by the Federal Reserve Bank of San Francisco.
Cannabis comes into the picture because Moonstone in its March 7 press release announcing the $11.5 private equity raise from Alameda stated that one of its goal was to become “a top provider of innovative financial services to fast-growing industries such as blockchain, cryptocurrencies and cannabis.”
It is unclear if Moonstone has provided any products or services to the cannabis industry, CBE has a query out asking just that, but Moonstone did step up its outreach to the cannabis community in September as presenting sponsor of “a free cannabis networking and community event in Seattle,” that reportedly attracted more than forty retailers and other businesses to the event.
Moonstone also is listed by the Washington State Department of Financial Institutions (DFI) as a Financial Services Option for Cannabis Retailers. While not an endorsement by the state, being on the list means the institution is “Regulated by DFI.”
The Nov. 23 Times article did not make any reference to cannabis, but it did point out a few odd crypto-coincidences that seem to connect the acquisition dots. “Farmington has more than one crypto connection,” wrote Stephen Gandel. “FBH bought the bank in 2020. The chairman of FBH is Jean Chalopin, who, along with being a co-creator of cartoon cop Inspector Gadget in the 1980s, is the chairman of Deltec Bank, which, like FTX, is based in the Bahamas. Deltec’s best-known client is Tether, a crypto company with $65 billion in assets offering a stablecoin that is pegged to the dollar.
“Tether has long faced concerns about its finances, in part because of its reclusive owners and offshore bank accounts,” continued Gandel. “Through Alameda, FTX was one of Tether’s largest trading partners, raising concerns that the stablecoin could have yet-undiscovered ties to FTX’s fraudulent operations.”
Another question is related to the level of oversight by federal regulators, a question Washington state regulators may also be asking of themselves. “It’s unclear how FTX was allowed to buy a stake in a U.S.-licensed bank, which would need to be approved by federal regulators,” wrote Gandel. “Banking veterans say it’s hard to believe that regulators would have knowingly allowed FTX to gain control of a U.S. bank.”
Gandel said requests for comment to Deltec and Moonstone had not been returned. CBE also has a request for comment out to Moonstone but has yet to hear back.
The FTX/Alameda/Moonstone story has continued without reference to cannabis on the Protos website, which has posted updates that include comments from Moonstone chief digital officer, Janvier Chalopin – whose father is FBH Chairman and Moonstone board member Jean Chalopin – who claimed the Alameda investment was for 10 percent of the bank. According to Protos, that would “value Moonstone at $115 million — a significant increase in value, considering that at the time, the bank held only $10 million in customer deposits and had roughly 25 employees. Chalopin said the $11.5 million was ‘seed funding… to execute our new plan of being a tech focused bank.’ When asked what would happen to that funding now that Alameda and FTX are bankrupt he said the bank is ‘still waiting,’ but suspects ‘[the equity] will follow the bankruptcy proceedings and be sold at some point.’”
The regulators have their work cut out for them, added the website. “Questions remain as to whether funds moving through the bank are related to Alameda and FTX or Tether and what kind of know-your-customer (KYC) and anti-money laundering (AML) was performed to ensure the funds weren’t tainted, or for instance, belonged to FTX customers rather than Alameda Research,” Protos concluded in its Nov. 25 post.
Protos posted yet another article today (Nov. 28) that added further comment from Moonstone CDO Chalopin responding to questions about particular executive personnel moves taking place at the bank. Chalopin also used the opportunity to point out that the Alameda investment had been passive, that it accrued no benefits from the deal other than equity, and that it was Moonstone that had sought out FTX/Alameda ‘around Autumn of 2021,’ pitching them “a while after that.” Moonstone, Chalopin further told Protos, is “definitely targeting future fundraising rounds.”
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