Moonstone Bank, the FTX-linked digital lender, announced this week that it will scrap plans to offer banking services for industries like crypto and cannabis.
The move is a sudden twist on the company’s original ambitions to turn the centuries-old Farmington State Bank, a small lender near the Washington-Idaho border, into a technology-focused finance company.
“The change in strategy reflects the impact of recent events on the crypto-asset industry and the resulting changing regulatory environment related to crypto-asset businesses,” Moonstone said in a press release.
After terminating its cryptocurrency and cannabis services, Moonstone will once again change its name to Farmington State Bank, returning to its roots as a “community bank,” according to the statement.
Farmington traces its origins to the small town of Farmington, Washington. The lender, founded in 1887, previously made loans focused on agriculture.
It was acquired in 2020 by FBH Corporation, owned by Jean Chalopin, also president of Bahamas-based Deltec Bank. Deltec’s most well-known customer is the cryptocurrency 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 funding in March from Alameda Research, the trading company whose financial difficulties have been cited as a key factor in the disappearance of FTX. The rapid collapse of FTX in November sent contagion through the crypto industry.
In acquiring Farmington, Moonstone received a bank charter, a business license required for US financial institutions to handle deposits and offer other bank-like services. Moonstone previously described itself as a “licensed digital bank.”
Bank experts previously told GeekWire that bank acquisitions require a significant amount of due diligence from regulators. Since Moonstone was partly foreign owned and involved in crypto, the deal should have raised more regulatory flags, they said.
Before it 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. His net worth was $5.7 million, according to the Federal Deposit Insurance Corporation, and he did not offer online banking or credit cards.
The Times reported that in the third quarter of this year, the bank’s deposits grew nearly 600% to $84 million. Most of the increase came from four new accounts, according to the Times.
It was later revealed that Moonstone had almost $50 million in FTX deposits, Forbes reported.
In December, Sen. Elizabeth Warren (D-Mass.) and Sen. Tina Smith (D-Minn.) pushed US banking regulators to investigate links between the banking industry and cryptocurrency companies, 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 legal and regulatory 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 at Vermont State Bank. It was previously led by Ron Oliveira, who stepped down as CEO in August.