Moonstone Bank, the digital lender with ties to FTX, announced this week that it was dropping plans to offer banking services to industries like crypto and cannabis.
The move is a sudden turning point from the company’s original ambitions to transform the century-old Farmington State Bank, a tiny lender near the Washington-Idaho border, into a tech-centric financial firm.
“The change in strategy reflects the impact of recent events in the crypto asset industry and the resulting changed regulatory environment in relation to crypto asset businesses,” Moonstone said in a press release.
Upon ending its crypto and cannabis services, Moonstone will change its name back to Farmington State Bank and return to its roots as a “community bank,” according to the press release.
Farmington originated in the small town of Farmington, Washington. Established in 1887, the lender previously provided agricultural loans.
It was acquired in 2020 by FBH Corporation, owned by Jean Chalopin, also chairman of Bahamas-based Deltec Bank. Deltec’s best-known customer is the crypto company Tether.
The New York Times reported Nov. 23 that FBH, the parent company of Farmington State Bank, received $11.5 million in venture capital in March from Alameda Research, the trading firm whose financial woes have been cited as a key factor in FTX’s demise . The rapid collapse of FTX in November has infected the crypto industry.
The Farmington acquisition gave Moonstone a banking license, a business license required by US financial institutions that process deposits and provide other banking-like services. Moonstone previously described itself as a “chartered digital bank.”
Banking experts previously told GeekWire that bank acquisitions require a significant amount of due diligence from regulators. Given that Moonstone was partially offshore owned and involved in crypto, the deal should have raised more regulatory flags, they said.
Before Farmington began raising capital to transform itself into a technology-focused bank, Farmington had just three employees and was the 26th-smallest bank in the US out of 4,800, the New York Times reported. Its net worth was $5.7 million, according to the Federal Deposit Insurance Corporation, and it didn’t offer online banking or credit cards.
The Times reported that the bank’s deposits rose nearly 600% to $84 million in the third quarter of this year. Much of the increase came from four new accounts, according to the Times.
It was later revealed that Moonstone held nearly $50 million in FTX deposits, Forbes reported.
In December, Sen. Elizabeth Warren (D-Mass.) and Sen. Tina Smith (D-Minn.) urged US banking regulators to investigate ties 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 was previously director of regulatory and legal affairs at the Washington State Department of Treasury and is an associate 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.