The Federal Reserve Board has ordered the wind-down of Farmington State Bank following the bank’s secret engagement in crypto-related activity, according to an enforcement action issued Thursday.
Farmington, which was linked to embattled crypto exchange FTX and for a time operated under the moniker Moonstone Bank, “improperly” changed its business plan to incorporate digital assets without notifying its regulatory supervisors or gaining approval to make said changes.
Thursday’s enforcement action, done in conjunction with the Washington State Department of Financial Institutions, blocks Farmington from “making dividends or capital distributions, dissipating cash assets and engaging in certain activities” without supervisory approval.
The bank had agreed, when it applied to be a bank holding company in 2020, not to engage in “digital bank operations.” Behind the Fed’s back, however, Farmington “committed to ‘work with’ [a] third party ‘to design the necessary IT infrastructure’ to facilitate the third party’s issuance of stablecoins to the public in exchange for receipt of 50 percent of mint and burn fees on certain stablecoins,” and took steps toward that commitment, the Fed said.
Farmington was founded in 1887 in the small agricultural town of Farmington, Washington, and for years operated as a community lender.
FBH, a company owned by French banker (and “Inspector Gadget” co-creator) Jean Chalopin, bought Farmington the bank in 2020; and the bank’s mission changed in March 2022 with an investment by hedge fund and FTX sister company Alameda Research. Alameda’s $11.5 million investment was double the bank’s net worth.
FTX and its associated companies went belly-up in November following years of alleged fraud, for which founder Sam Bankman-Fried will stand trial in October and for which several former executives have already pleaded guilty. To distance itself from FTX, Farmington — then called Moonstone — retreated to its heritage name and from crypto dealings overall in January, saying at the time that the pivot “reflect[ed] the impact of recent events in the crypto assets industry and the resultant changing regulatory environment.”
That month, prosecutors seized some $50 million from the bank, alleging the funds were associated with fraud committed by FTX.
On Thursday, Farmington announced that it had consented to the Fed’s order, and that it “looks forward to working with the Federal Reserve and the Washington DFI on the orderly liquidation and wind down of the bank.”
Farmington’s deposits and assets have been sold for an undisclosed sum to the Bank of Eastern Oregon, with the transaction expected to close by Aug. 31.
Bank of Eastern Oregon did not return a request for comment by press time.
