FTX stake in US Bank raises concerns about banking loopholes

The chairman of the rural bank, Jean Chalopin, is also the chairman of Deltec Bank, which has Tether and Alameda on its client list. This raises concerns about banking loopholes.

Numerous new aspects of the unethical practices of cryptocurrency exchange FTX have been revealed by the bankruptcy proceedings. The most recent disclosure around its stake in perhaps of the littlest Joined State banks from provincial Washington has raised new worries about its activities and asserted abuse of banking escape clauses.

Moonstone, formerly Farmington State Bank in Washington State, is the 26th-smallest bank in the United States, with just one branch and three employees. In March 2022, FTX invested $11.5 million in the rural bank through its now-defunct sister company Alameda and its parent company, FBH. According to The New York Times, the value of the Alameda investment was more than double that of the bank, which was $5.7 million.

Moonstone’s ownership by the FTX is seen as a way to avoid having to have a banking license in the United States, which many believe is a difficult task.
According to a Reddit user, “buying a small bank is often a back door to getting a license, which would be a natural part of a business plan for something like FTX,” since obtaining a banking license requires a great deal of effort.

Another user mentioned the alleged misuse of banking loopholes and the absence of crypto regulatory oversight. Others speculated that Sam Bankman-Fried’s political ties may have also contributed to the transaction, saying:
“I wouldn’t be surprised if he just got that license for no reason either, given the amount of political connections SBF had.”

The connection between the rural bank’s parent company, FBH, and another crypto entity, Tether, the largest issuer of a stablecoin in the crypto market at the moment, drew more attention from the crypto community than FTX’s stake in a U.S. bank.

Jean Chalopin is the chairman of FBH. He is also the chairman of Deltec Bank, which has clients like Tether and Alameda. FBH applied for approval from the Federal Reserve in 2020, nearly a century after the bank was established to facilitate cryptocurrency-related transactions. In June 2021, the bank received federal approval, and nine months later, FTX invested in the rural bank, which now had approval from the Federal Reserve.

As Tether has long been the subject of reserve audits, the banking connection between Tether and FTX/Alameda became a concern for many in the crypto community.

Related Posts