Crypto Firm FTX’s Ownership of a U.S. Bank Raises Questions

Before the acquisition, Farmington’s deposits had been steady at about $10 million for a decade. But in the third quarter this year, the bank’s deposits jumped nearly 600 percent to $84 million. Nearly all of that increase, $71 million, came from just four new accounts, according to F.D.I.C. data.

It’s not clear what FTX’s plan was for Farmington. Online, Farmington now goes by Moonstone Bank. The name was trademarked a few days before FTX’s investment. Moonstone’s website doesn’t say anything about Bitcoin or other digital currencies. It says Moonstone wants to support “the evolution of next generation finance.”

Deltec and Moonstone did not return a request for comment.

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. Banking veterans say it’s hard to believe that regulators would have knowingly allowed FTX to gain control of a U.S. bank.

“The fact that an offshore hedge fund that was basically a crypto firm was buying a stake in a tiny bank for multiples of its stated book value should have raised massive red flags for the F.D.I.C., state regulators and the Federal Reserve,” said Camden Fine, a bank industry consultant who used to head the Independent Community Bankers of America. “It’s just astonishing that all of this got approved.”

Article source: https://www.nytimes.com/2022/11/23/business/ftx-cryptocurrency-bank.html