In a statement released August 17, 2023, Farmington State Bank, with an investment from Sam Bankman-Fried’s Alameda Research, consented to a cease and desist order from the U.S. Federal Reserve. Alameda invested $11.5 million into the bank’s coffers in January 2022. Government seizure documents from January 2023 indicate Bankman-Fried reportedly had $50 million stashed in the bank.
Fed Puts Brakes on Alameda-Funded Farmington: Another Bank Bites the Dust
Farmington State Bank (Moonstone Bank) is complying with the U.S. central bank’s cease and desist order signed July 18, 2023. The Federal Reserve Board and Washington State Department of Financial Institutions (WDFI) issued the order against Farmington State Bank of Farmington, Washington, and its holding company, FBH Corporation of Baltimore, Maryland.
The regulators determined Farmington violated commitments to regulators by engaging in digital asset activities, such as stablecoin issuance, without necessary approvals. Farmington allegedly agreed to build infrastructure to facilitate a third-party’s stablecoin issuance in exchange for fees, began implementation and altered its business model without regulatory approval.
The order mandates Farmington cease unauthorized activities, halt dividends, maintain assets and avoid further actions without written consent. The bank also agreed to sell all loans and deposits and terminate operations. Farmington’s August 17 press release confirmed adherence to the Federal Reserve and WDFI order. Alameda Research funded the bank in January 2022.
Following the FTX and Alameda downfall, the bank acknowledged Alameda’s $11.5 million investment, describing the quantitative trading firm as a “passive investor.” In January 2023, federal prosecutors revealed the seizure of $697 million in assets from Bankman-Fried. While the majority ($526 million) consisted of 56 million Robinhood shares, $50 million was purportedly taken from Farmington, also known as Moonstone Bank.
Prosecutors noted at the time that it was believed the confiscated funds were misallocated FTX customer assets. Farmington is among numerous banks forced to wind down operations this year, curiously associated with FTX, Alameda, and Bankman-Fried in various capacities.