Crypto Critics' Corner Moonstone Bank: FTX, Deltec, and the Mission to Move Millions
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Oct 20, 2023 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.
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Tiny Farmington Bank Became Moonstone Overnight
- Farmington State Bank was a tiny community bank in eastern Washington with only a few hundred local residents and minimal assets before being bought and renamed Moonstone.
- Jean Chalapen, owner of Bahamas-based Deltec, bought it after decades of foreign ownership and already ran major crypto banking relationships like Tether and FTX.
Alameda's Investment Vastly Overvalued Moonstone
- Alameda Research invested $11.5M for 9.9% of Moonstone, valuing the bank at about $115M despite its prior ~$5M in assets.
- Around the same time, FTX deposited roughly $50M of Moonstone's deposits and loaned $50M to Deltec, massively altering the bank's funding mix.
Regulatory Switch Enabled Quick Risky Pivot
- After purchase Moonstone transferred regulatory oversight from the FDIC to the Federal Reserve, promising not to change business significantly.
- They then immediately shifted to crypto and cannabis banking and rebranded to signal that pivot, breaking the initial commitment.