Fed cracks down on bank with FTX ties
Driving the news: Farmington State Bank and its holding company FBH were slapped with a cease-and-desist after violating commitments to state and federal regulators by engaging in digital asset activity.
- The order did not mention FTX or Alameda.
Zoom in: The Federal Reserve Bank of San Francisco approved FBH's application to be a holding company in Sept. 2020 as it bought Farmington Bancorp.
- FBH at the time didn't have a master account, though, Farmington State Bank did (since the 1990s), according to the FRB database of master accounts.
- Alameda acquired a stake in FBH in March 2022 for $11.5 million; the holding single-branch bank's was worth $5.7 million at the time.
In the weeds: All of that describes what is called a "charter strip," that is when a company that wants to open a bank with a new business model simply buys one, instead of applying for a de novo bank charter.
The intrigue: FBH's Chairman Jean Jacques Pierre Chalopin, of the Inspector Gadget cartoons and owner of the Bahamas-based Deltec Bank was named in the Fed's enforcement action, but was not charged as an individual.
- Just last month U.S. authorities were authorized to seize millions from Deltec amid a fraud investigation; Deltec has links to Tether.
Of note: Farmington worked with a third party to facilitate the issuance of their stablecoins to the public in exchange for "50 percent of mint and burn fees on certain stablecoins," per the Fed's cease-and-desist.
- The bank was also ordered to take steps "to preserve records and suspend any deletion, overwriting, modification, or other destruction of all paper documents, electronic documents, physical items, and data under their control."