The Federal Reserve Board of the United States and the Washington State Department of Financial Institutions have introduced an enforcement action against Farmington State Bank, a monetary establishment whose father or mother firm acquired greater than $11 million from Alameda Research.
In an Aug. 17 announcement, the Fed said the enforcement action was associated to Farmington “improperly chang[ing] its business plan” in 2022 with out correct notification and approval. The bank didn’t inform the Fed it meant “to pursue a technique centered on digital banking companies or digital belongings.” Formerly named Moonstone, Farmington acquired roughly $11.5 million from FTX’s sister agency Alameda by means of its holding firm FBH Corporation in March 2022.
“The Board’s action ensures the bank’s operations will wind down in a manner that protects the bank’s depositors and the Deposit Insurance Fund,” stated the Fed. “The action also prohibits Farmington and FBH from making dividends or capital distributions, dissipating cash assets, and engaging in certain activities without approval from its supervisors.”
— Federal Reserve (@federalreserve) August 17, 2023
Farmington introduced in January that it planned to exit the crypto space in an effort to return to its “original mission” as a group bank. However, the Fed enforcement action suggests the bank had “engage[d] in activities related to digital assets,” together with facilitating the issuance of stablecoins for an unnamed third social gathering “in exchange for receipt of 50 percent of mint and burn fees.”
The Fed reported Farmington, based mostly in Washington, had deliberate to promote its loans and deposits to the Bank of Eastern Oregon. Neither the Fed enforcement action nor the transfer to go away the house explicitly talked about crypto alternate FTX, which declared chapter in November 2022.
The enforcement action represented the most recent by federal regulators against banks with ties to crypto corporations and buyers within the wake of the FTX collapse. Silvergate Bank’s father or mother firm introduced in March it deliberate to “wind down operations” for the crypto bank. This action preceded Silicon Valley Bank collapsing amid a run on deposits and the Federal Deposit Insurance Corporation shutting down the crypto-friendly Signature Bank.
U.S. lawmakers conducted several hearings within the wake of the bank failures, with some suggesting that ties to crypto corporations had contributed to the banks’ collapse. New York Department of Financial Services superintendent Adrienne Harris reportedly stated it was “ludicrous” accountable digital belongings for the collapse of Signature.