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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Fed brings enforcement action against FTX-linked Farmington State Bank

Farmington State Bank is shown on Nov. 25. The bank served the tiny Whitman County town for about 126 years before it closed on August 31, 2023.   (Garrett Cabeza/The Spokesman-Review)
By Allyson Versprille Bloomberg

The U.S. Federal Reserve took enforcement action against Farmington State Bank, a Whitman County lender with ties to failed crypto firm FTX, and its holding company FBH.

The Federal Reserve Board issued a cease-and-desist order against the firms and directed them to take a number of actions as Farmington closes its business – including preserving records and not acquiring any additional brokered deposits.

“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,” the Fed said in a statement Thursday. “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.”

Farmington, which for a time did business as Moonstone Bank, drew scrutiny after it came to light that Alameda Research, the hedge fund co-founded by former FTX Chief Executive Officer Samuel Bankman-Fried, invested $11.5 million in the lender to take a non-controlling stake.

Farmington was founded in 1887 in the rural town. For decades, it offered traditional banking services and loans to local residents and farming operations, the Federal Reserve said.

The bank was purchased in 2020 by FBH. The holding company’s president and chairman is Bahamas resident Jean Chalopin.

After the investment from Alameda, the bank in 2022 changed its operations to shift into emerging areas, such as crypto. The Fed said the lender made that change without giving proper notification to its bank supervisors and obtaining prior approval.

The bank announced in January that it would halt plans to develop services for the digital-asset and cannabis industries. In May, it agreed to voluntarily sell its loans and deposits to the Bank of Eastern Oregon, according to the Fed.

The bank, one of the few businesses still operating in the Whitman County farming town of about 150 people, sent an Aug. 1 letter telling customers that their deposits and bank accounts have been sold to the Bank of Eastern Oregon, which has a branch in Colfax.