• The Federal Reserve Board has taken enforcement action against Farmington State Bank, a small bank linked to now-defunct crypto exchange FTX, for engaging in undisclosed digital asset activities.
• The Fed claimed that Farmington made a sudden transition to a pro-digital assets business plan in 2022 without notifying the supervisors and obtaining prior approval.
• Sam Bankman-Fried, the founder of FTX is facing new allegations from the Department of Justice (DOJ) including embezzlement of customer funds.
FTX-Linked Bank Receives Federal Enforcement Action
The Federal Reserve Board has taken enforcement action against Farmington State Bank, a small bank linked to now-defunct crypto exchange FTX, for engaging in undisclosed digital asset activities. According to a Thursday press release, the Federal Reserve Board, in collaboration with the Washington State Department of Financial Institutions, has directed Farmington State Bank – known as Moonstone Bank – to wind down its operations.
Bank Made Sudden Transition To Pro Digital Assets Business Plan
The Fed claimed that Farmington undertook digital assets-related activities without the knowledge and approval of its supervisors. It noted that the bank made a sudden transition to a pro-digital assets business plan in 2022. „In 2022, Farmington improperly changed its business plan without notifying the bank’s supervisors and obtaining prior approval for those changes,“ the announcement read. The Fed and the Washington State Department of Financial Institutions have now restricted the bank from making dividends or capital distributions, dissipating cash assets, and engaging in specific activities without prior approval from their supervisors.
Farmington Vowed To Abstain From Digital Banking Operations
Farmington State Bank had previously vowed to abstain from digital banking operations and refrain from altering its business plan; as part of an agreement signed with the Reserve Bank in 2020 per the announcement. Despite this commitment, however;the bank collaborated with a third party to establish an IT infrastructure designed to facilitate issuance of stablecoins;in return allegedly receiving 50% of mint &burn fees associated with certain stablecoins. Historically;Farmington State Bank operated as community lender;focusing on traditional financial services rather than digital assets dealings.
Federal Prosecutors Seize $50 Million From Farmington
However;the bank’s course changed when Alameda Research;a sister company to FTX acquired an $11.5 million stake in institution last year &earlier this year federal prosecutors seized $50 million from farminton state claiming funds were part of fraudulent scheme orchestrated by ftx’s founder sam banman fried deceive crypto investors .
Sam Banman Fried Faces New Charges After Being Jailed
The disgraced founder of ftx is facing new allegations from department justice (DOJ) including embezzlement customer funds according indictment filed monday banman fried accused misappropriating &embezzling customer deposits exchanges accounts into his own account evade taxes .
