Moonstone Bank, the digital lender with ties to FTX, announced this week that it will be ending plans to offer banking services for industries such as crypto and cannabis.
This is a sudden pivot from the company’s original ambitions to turn Farmington State Bank, a tiny lender near the Washington-Idaho border, into a technology-focused financial company.
“The change in strategy reflects the impact of recent events in the crypto asset industry and the resulting changing regulatory environment surrounding crypto asset businesses,” Moonstone said in a press release.
After ending its crypto and cannabis services, Moonstone will change its name back to Farmington State Bank, returning to its roots as a “community bank,” according to the release.
Farmington is based in the small town of Farmington, Wash. The lender, founded in 1887, previously provided loans focused on agriculture.
It was acquired in 2020 by FBH Corporation, owned by Jean Chalopin, who is chairman of Deltec Bank, based in the Bahamas. Deltec’s most famous client is crypto company Tether.
The New York Times reported Nov. 23 that Farmington State Bank’s parent company, FBH, received $11.5 million in venture capital funding in March from Alameda Research, the trading firm whose financial struggles have been cited as a major factor in FTX’s demise. The rapid fall of FTX in November sent contagion through the crypto industry.
By acquiring Farmington, Moonstone obtained a banking charter, a business license required for US financial institutions that handle deposits and offer other bank-like services. Moonstone has previously described itself as a “charter digital bank.”
Banking experts previously told GeekWire that bank acquisitions require a significant amount of due diligence from regulators. Since Moonstone was partly owned offshore and involved crypto, the deal should have raised more regulatory flags, they said.
Before it began raising capital to transform into a technology-focused bank, Farmington had just three staff members and was the 26th smallest bank in the U.S. out of 4,800, the New York Times reported. His net worth was $5.7 million, according to the Federal Deposit Insurance Corporation, and he offered no online banking or credit cards.
The Times reported that the bank’s deposits increased by nearly 600% to $84 million in the third quarter of this year. The majority of the increase came from four new accounts, according to the Times.
Moonstone was later revealed to have nearly $50 million in FTX deposits, Forbes reported.
In December, Senator Elizabeth Warren (D-Mass.) and Senator Tina Smith (D-Minn.) pressed US bank regulators to investigate the links between the banking industry and cryptocurrency firms including Moonstone .
In January, Joseph Vincent quietly left his position as Moonstone’s chief legal officer. Vincent joined Moonstone in May and resigned in December, according to his LinkedIn profile, and as reported by Protos. He previously served as director of regulatory and legal affairs at the Washington State Department of Financial Institutions and is an adjunct professor of law at Seattle University.
Moonstone is led by CEO Gary Rever, who is a director of Vermont State Bank. It was previously headed by Ron Oliveira, who left the CEO position in August.