A recent report revealed that the United States Federal Reserve has dished out a cease and desist (C&D) decree to Farmington State Bank on account of violating the obligations it agreed to while it was registering its business with the regulator.
According to the report, Farmington State, which is a bank funded by Alameda Holdings, has been ordered to stop its operations in America by the Board of Governors of the Feds Reserve. In addition, the report revealed that the Department of Financial Institutions for Washington State also corroborated the decree of the Feds, and the affected firm has succumbed to the order.
Furthermore, the report revealed that Farmington State Bank (FSB) is owned by another firm called FBH, whose president, Jean Chalopin, also owns another famous bank, Deltec, which is based in the Bahamas. FSB has offered its services to multiple cryptocurrency firms such as Tether, Bitfinex, FTX, and Alameda Research, reportedly.
In addition, the news stated that Alameda Research had an investment worth about $11.5 million in FSB and gave a loan of about $50 million to Deltec Bank. Notably, Farmington State Bank has initially disclosed its decision to liquidate and sell all its assets and deposits to the Bank of Eastern Oregon (BEO), and according to the report, the sale is still in progress.
Feds Accused Farmington State Of Violating Commitments
The chief executive officer of BEO, Jeff Bailey, asserted that the cease and desist order that the Feds issued Farmington States Banks wasn’t a surprise. He added that the bank was purchased with a relatively small capital, and BEO already has multiple branches in the same county where FSB was. In addition, he stated that BEO has nothing to do with the crypto markets, according to the report.
As reported in the news, Farmington agreed to many restrictions while seeking permission to merge with the United States Federal Reserve project. Some of these limitations include seeking proper approval before changing the business model of the bank, executive management, or venture into a virtual banking system.
However, the Feds pointed out that despite Farmington agreeing to commit to the obligations, it violated the rules as it altered the business model of its recently launched Moonstone Bank brand by focusing on offering its services to crypto startups, expending huge assets to develop its virtual banking capacities in the process. In addition, the bank signed a contract to launch a stablecoin which it would need to pay a portion of the cost.
According to the Federal Reserve System, by engaging in the above-stated activities, Farmington violated the commitments it pledged allegiance to, further raising concerns on how it acquired its rural bank, particularly during a time when FTX’s bankruptcy massively impacted Alameda Research which was a major investor in the bank.
Farmington To Create Succor Spot For Employees After Dissolution
However, Farmington State’s director of operations, Joise Booth, fourth back the allegation, claiming that the mongered notion that virtual assets had been at the core of the bank’s fallout was a lie. He added that the rural bank is also struggling, and for many years now, Farmington had been declining in operation and profits prior to the pivot. Booth also pointed out that the media is spread g the wrong image about the bank.
According to Booth, Farmington State has been planning for a while now to create a soft landing for the numerous employees that would be affected when the bank is eventually dissolved. Also, the cease and desist (C&D) order the feds issued is standard without any fines, charges, or penalties attached to it.
However, the C&D asserted that the bank preserves records and avoids deleting, modifying, or destroying any form of the document, be it electronic, paper, or physical, that is in its possession. Confirming the assertion, a lawyer stated that a preservation duty always arises whenever an entity faces regulatory action.
Nonetheless, the report revealed that the only positive news from the recent development was that the dissolution and liquidation of Farmington State Bank for its involvement in crypto could result in FTX and Alameda’s creditors being repaid from the $11.5 million investment. Another source claimed that the bank has been in a steady green state in terms of finance, suggesting that some of its profits might be disbursed to investors.
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