Amidst raging allegations that FTX led by its founder Sam Bankman-Fried splurged users’ money and stashed away a sizable chunk to safe havens, FTX’s ownership stake in Farmington Bank has come to light.
Farmington Bank in Washington State is also known as Moonstone bank in cyberspace and operates in just one location with only three full-time staff. Farmington is the 26th smallest bank in the United States among the 4,800-odd small banks. According to the Fed Deposit Insurance Corp (FDIC), its total assets amounted to $5.8 million.
Reports said FTX invested heavily in the minor bank through its subsidiary firm. In March 2022, Alameda Research reportedly invested $11.6 million in Farmington State Bank’s parent company, FBH, cementing a strong relationship between the two institutions. FBH acquired the Farmington Bank in 2020 when it had deposits of around $10 million.
Its deposits zoomed 600% to $84 million in the third quarter of 2022. According to FDIC statistics, much of the new deposits amounting to $71 million came from four new accounts.
If Farmington Bank investment is tied to the missing assets of FTX is a moot question.
A banking sector expert wondered it is perplexing that an overseas investment firm operating from the Bahamas buying shares in a tiny bank did not evoke any red flags from the FDIC and state regulators.
The news about the bank stake came to light a day after FTX’s first day in court, where James Bromley of Sullivan & Cromwell’s law firm, the counsel for FTX, called the bankruptcy case “unprecedented” in the history of corporate America.