The bankruptcy proceedings of cryptocurrency exchange FTX have revealed many new aspects of its unethical practices. The latest revelation surrounding his stake in one of America’s smallest banks in rural Washington has raised new concerns about its operations and the alleged misuse of banking loopholes.
Farmington State Bank of Washington State, now renamed Moonstone, is the 26th smallest bank in the United States, with a single branch and three employees. FTX invested in the rural bank through its sister company Alameda, now bankrupt, with an investment of USD 11.5 million in its parent company FBH in March 2022. Alameda’s investment was more than double the value of the bank, which was of USD 5.7 million, reported The New York Times.
FTX’s ownership of Moonstone is seen as a move to circumvent US banking license requirements, which many say is a rather complex task.
One Reddit user wrote that it takes a lot of work to get a banking license and therefore “Buying a small bank is often a back door to licensing, which would be a natural part of a business plan for something like FTX.”
Another user pointed to the perception of the misuse of banking loopholes and the lack of regulatory oversight of cryptocurrencies. Others speculated that Sam Bankman-Fried’s political connections might have played a role in the deal as well, saying:
“With the number of political connections the SBF had, I also wouldn’t be surprised if they got that license for no reason.”
Aside from FTX’s involvement in a US bank, what has drawn the most attention from the cryptocurrency community is the connection between the parent company of rural bank FBH and another cryptocurrency entity, Tether, the largest stablecoin issuer on the market. of cryptocurrencies currently.
The president of FBH is Jean Chalopin, who happens to also be the president of Deltec Bank, which has Tether and Alameda on its client list. After purchasing the bank in 2020, FBH sought approval from the Federal Reserve nearly 100 years after the bank’s founding to facilitate cryptocurrency-related transactions.. The bank gained federal approval in June 2021, and nine months later, FTX invested in the rural bank, now equipped with Federal Reserve approval.
The banking connection between Tether and FTX/Alameda became a concern for many in the cryptocurrency community, as Tether itself has long been under scrutiny from reserve audits. Tether did not respond to Cointelegraph’s requests for comment at press time.
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