Moonstone Bank: FTX, Deltec, and the Mission to Move Millions
Oct 20, 2023
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The podcast discusses the intriguing story of Moonstone Bank, its connection with FTX and Deltec Bank, and the overvaluation of the bank. It also explores the strategies used to establish banking partnerships in the crypto industry and the aftermath of the revelations about Moonstone Bank. The regulatory approach towards banks and the importance of US banking access are also explored.
Moonstone Bank was involved in criminal behavior and violated regulatory promises, leading to its decline and acquisition by another bank.
Alameda Research and FTX's suspicious investment and involvement in Moonstone Bank raised concerns about oversight and regulation in the banking industry.
Deep dives
Overview of Moonstone Bank
Moonstone Bank, formerly known as Farmington Bank, was a small community bank located in Eastern Washington state. It primarily served local farmers in the tiny town of Farmington. The bank was purchased by a Hong Kong citizen in the 1990s and eventually sold to Jean Chalapen, an incredibly wealthy banker and the creator of the cartoon Inspector Gadget. Jean Chalapen also owned Deltech Bank and Trust in the Bahamas, which served as the main bank for Tether, FTX, and Alameda Research. Moonstone Bank was seen as a potential future of online banking, aimed at serving cryptocurrency and cannabis industries. However, after closer examination, it was discovered that Moonstone Bank was involved in criminal behavior and violated regulatory promises.
Alameda Research's Involvement
Alameda Research, a prominent cryptocurrency company, invested $11.5 million in Moonstone Bank, owning a 9.9% stake and valuing the bank at $115 million. Additionally, $50 million in deposits came from FTX funds, and FTX provided a $50 million loan to Deltech Bank. The investment and involvement of Alameda Research and FTX raised suspicions given the small size of the bank and the questionable valuation. The Federal Reserve, who took over regulatory oversight of the bank, did not intervene at the time, allowing Moonstone Bank to continue with its operations.
Unraveling and Cease and Desist
As the public became aware of the questionable activities surrounding Moonstone Bank, there was a decline in confidence. Farmington State Bank, now known as Moonstone Bank, announced a transition back to its old business model, disassociating from cryptocurrencies and cannabis. Subsequently, Farmington State Bank was acquired by another Washington-based bank, and a Federal Reserve cease and desist letter was issued. The letter highlighted the bank's violations, including changes in management, business plans, and deposit mix without approval. The bank's assets were ultimately sold to the Bank of Eastern Oregon, and the problematic activities were resolved, though questions remain about oversight and regulation in the banking industry.
Bennett and Cas discuss Farmington State Bank/Moonstone Bank, the Washington State bank that Alameda Research invested in - valuing at an unbelievable $150 million.
