Regulators have issued a cease and desist order against a
In an enforcement action announced Thursday morning, the Federal Reserve said it has entered into an agreement with Farmington State Bank, a $22 million bank that had received an $11 million investment from Alameda Research, the hedge fund arm of failed crypto exchange FTX.
The enforcement action, which does not cite FTX or Alameda by name, notes that Farmington — a more than 130-year-old institution that briefly changed its name to Moonstone Bank — and its Baltimore-based holding company FBH Corporation, violated commitments to state and federal regulators by engaging in digital asset activity and helping third parties issue stablecoins.
The letter states that Farmington "changed the bank's business plan and general character without receiving prior written approval" from the Fed Board of Governors, the Federal Reserve Bank of San Francisco or the Washington State Department of Financial Institutions. In doing so, the bank holding company — formerly known as GUVJEC Investment Corporation — violated agreements put in place in 2020 when regulators signed off on its acquisition of Farmington.
The bank holding company is owned by Jean Jacques Pierre Chalopin, a Bahamas-based executive and chair of Deltec Bank, which counts stablecoin issuer Tether as one of its most significant clients.
In January, the bank ceased providing digital asset services and struck an agreement to sell all of its assets to Heppner, Oregon-based Bank of Eastern Oregon, an $850 million institution with branches in Oregon, Washington and Idaho.
As a result of the enforcement action, Farmington will be forced to maintain a Tier 1 capital level of at least 9 percent and preserve its cash assets. Its business activities will be limited to those necessary to complete its sale to Eastern Oregon.
"The Board's action ensures the bank's operations will wind down in a manner that protects the bank's depositors and the Deposit Insurance Fund," the Fed noted in a statement released Thursday morning. "The action also prohibits Farmington and FBH from making dividends or capital distributions, dissipating cash assets, and engaging in certain activities without approval from its supervisors."
The Fed also stipulated that the bank must retain all records and submit regular status reports on its wind down.
Regulators say they signed off on Chalopin's acquisition of Farmington on the grounds that he would continue the depository's long standing business model of providing savings and loan services to the rural community in eastern Washington. Any changes, including the expansion of digital banking services, would need prior consent from regulators for a period of three years, the action notes.
Farmington's involvement with FTX emerged late last year as part of bankruptcy proceedings for the failed digital asset company, which was at one time the second largest crypto exchange in the world.
In December, Federal Deposit Insurance Corp. Chair Martin Gruenberg said the agency was
Farmington was a state-chartered member bank of the Federal Reserve, making the San Francisco Fed its primary federal regulator.
