Posted on 11/26/2022 7:15:48 AM PST by DoodleBob
Documents in the failed crypto exchange FTX’s bankruptcy recently revealed that the firm–through its sister hedge fund Alameda–infused $11.5 million into Moonstone Bank, formerly Farmington State Bank. As more questions are raised than answers, the bank’s chief digital officer Janvier Chalopin attempted to clear the air about the curious stake.
The investment, according to Chalopin, was a “seed funding… to execute [their] new plan of being a tech focused bank.” He added that the investment was for 10% of the bank, valuing Moonstone at $115 million – a considerable boost in value considering the bank had just $10 million in customer deposits and only 25 staff at the time.
In March, Alameda spent $11.5 million on Farmington State Bank’s parent company, FBH. According to the Federal Deposit Insurance Corporation, the bank’s net worth was $5.7 million; it was the 26th-smallest bank in the country out of 4,800 at the time of the investment. It only had a single location and three staff as of this year prior to the acquisition. It didn’t even have online banking or a credit card.
But it is not only the peculiar stake that raised some questions. Back in 2020, Farmington State Bank was acquired by FBH whose chairman was Jean Chalopin, Janvier’s father. He is also the chairman of Deltec Bank, which, like FTX, is based in the Bahamas–but its most well-known client is a $65-billion crypto firm called Tether.
It’s unclear how FTX–based in Bahamas–was permitted to acquire a stake in a US-licensed bank, which would require approval from federal regulators. Banking professionals say it’s difficult to believe authorities would have knowingly permitted FTX to take control of a US bank.
When asked what would happen to that funding now that Alameda and FTX have gone bankrupt, he stated that the bank is “still waiting,” but that “[the equity] would follow the bankruptcy proceedings and be sold at some point.”
Chalopin, on the other hand, does not see Alameda’s demise as a significant challenge to the bank, saying “reputationally, [it’s] sad to see PR coming out negatively against us while we’re in early startup mode.”
Farmington State Bank was formed in 1929. A British citizen named Archie Chan acquired the bank in 1995, owning it until FBH bought it in 2020. In 2010, John Widman, the bank’s president, boasted about not offering credit cards, having more deposits than loans, and being a hobby farmer.
Farmington’s deposits had remained stable at around $10 million for a decade prior to the acquisition. However, the bank’s deposits increased about 600% to $84 million in the third quarter of this year, presumably after the Alameda investment. Chalopin argued that the bank has had “substantially more customers than that since we opened our doors to friends and family on our new platform.”
The bank trademarked the name Moonstone Bank on March 1, 2022 and changed to that brand three days later. Come March 7, Alameda invested $11.5 million into the newly-named bank.
Chalopin explained that the name was inspired by the startup bank’s two asset classes: “playing on ‘to the moon’ and ‘stone’ for our target industries of digital assets and hemp/cannabis related business.”
He also clarified prior reports saying that the bank had not been a Federal Reserve account holder until last year, indicating that Moonstone had been a Federal Reserve account holder but had “switched from the FDIC as their regulator to the Fed of SF.”
In a bizarre development, Moonstone CEO Ron Oliviera has his LinkedIn account changed from his chief executive position yesterday to having left the bank in August and is now a “self-employed” person. Now, the bank’s website lists Gary Rever as CEO, whose LinkedIn account shows he’s been a director of the bank’s board since February 2021.
...
The curious Farmington investment is one of the many surprises that were revealed during FTX’s bankruptcy proceedings. The crypto exchange, Bankman-Fried’s parents, and senior officials of the firm purchased at least 19 homes in the Bahamas valued at roughly $121 million over the last two year, according to official documents.
In his letter to staff after he signed the bankruptcy papers, Bankman-Fried claimed that there are “potential interest in billions of dollars of funding came in roughly eight minutes” minutes after inking the process final.
“Maybe there still is a chance to save the company. I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole. But I can’t promise you that anything will happen. Because it’s not my choice,” the FTX founder quipped in the letter.
NOTE WELL.........Tens of billions of U.S. dollars have been funneled to Ukraine, laundered through FTX; the laundered money now in the form of FTX cryptocurrency was funneled back to Dems..........
Biden was a fully engaged participant with Zelensky.
The latter setting the price......the former blithely sending billions Zelensky asked for.
Questions are being asked
<><> how FTX got federal approval to buy its stake in the Farmington mini bank.
<><>it’s hard to believe regulators would have knowingly allowed the crypto firm to do so.
Is the wigged mad Maxine, FTX campaign funds taker, Senate banking committee chair.....in on it?
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Here’s where it gets interesting. The bank, which had posted net income routinely with small quarterly losses over the years, started cranking out quarterly losses of $22k, $44k, then losses shot up to $558k, $576k, $1,085k, and finally a whopping $2.6MM loss in the most recent quarter. Meanwhile, there are equity injections commingled with the losses.
Pretty hefty losses.
<><>who was borrowing money that created the losses?
<><>were the losses in the bank’s securities trading account??
We demand a full accounting.
Contact Congress
U.S. House of Representatives:
* Telephone: 202-225-3121
* Website: http://www.house.gov/
U.S. Senate:
* Telephone: 202-224-3121
* Website: http://www.senate.gov/
I'd like to meet a few of these potential investors at a poker table
laundromat...
What is the name of the fed regulator that signed off on the deal?
Quarterly salary and benefits was about $80k prior to 2020.
In the quarter ending June 30, 2022, that expense jumped to $1.2MM. And there was an unexplained $1.6MM in "Additional non interest expense." THAT is what drove that quarter's loss of $2.6MM.
Something is rotten in Farmington.
That is shady. There’s no way this went undetected.
I declare “Shenanigans”.
Banks that small don’t even have an official IT person—it’s farmed out to some local computer store.
I’m getting an “Ozark” feeling from this saga.
The Federal Reserve is the bank’s primary Federal regulator. The state regulator is the Washington Department of Financial Institutions. Both agencies would have had to approve the transaction. Neither agency has any enforcement action against the bank as of 11/23/22. Given the small size of the bank, there is no requirement for SEC filings or audited financial statements with an audit firm’s unqualified opinion.
The bank trademarked the name Moonstone Bank on March 1, 2022 and changed to that brand three days later. Come March 7, Alameda invested $11.5 million into the newly-named bank.
Chalopin explained that the name was inspired by the startup bank’s two asset classes: “playing on ‘to the moon’ and ‘stone’ for our target industries of digital assets and hemp/cannabis related business.”
The OCC or the FDIC would have been the likely regulator options.
Until something suspect happens or the money is known to be illegally acquired, I’m not sure what restrictions there are on cash infusions from investors.
I will say I am blown away with any bank under the multi-billions of dollars in assets having a person with a “chief digital officer” title.
Correction: at the time the current group acquired the bank, the primary Federal regulator was the FDIC. The bank later switched to the Federal Reserve as primary regulator. For any bank to switch Federal regulators, it must be rated satisfactory in the areas of safety and soundness, consumer compliance, the Community Reinvestment Act, and IT. So the bank was in a financially sound and compliant position as of the time when it switched Federal regulators. However, since the bank was acquired by a firm that would become a bank holding company, the change in control would be subject to three agencies: the Federal Reserve, the FDIC, and the State regulator.
This seems important. So FTX bank could access the Federal Reserve discount window, potentially be a primary dealer, be able to directly access QE and maybe bail-out money, without worrying about Fed.gov?
The bank had a state charter, so the OCC would not be involved. It was the FDIC, although the new ownership group switched Federal regulator from the FDIC to the Federal Reserve.
“Maybe there still is a chance to save the company. I believe that there are billions of dollars of genuine interest from new investors that could go to making customers whole.
two asset classes: “playing on ‘to the moon’ and ‘stone’ for our target industries of digital assets and hemp/cannabis related business.”
Even they sent him packing, but he probably found another bank.
Some people are going to have to go to jail here - and I don’t mean that kid and his dopey girlfriend.
They certainly didn’t cook this up on their own.
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