How Bankman-Fried sentence ties back to Whitman County’s Farmington Bank
The sentencing Thursday of former FTX CEO Sam Bankman-Fried to 25 years in prison was the bookend of a legal case in New York. But the case also had implications for Eastern Washington: it helped kill a community bank.
Bankman-Fried, who was ordered to pay $11 billion in restitution, orchestrated one of the largest financial crimes in the nation’s history.
The co-founder of crypto exchange FTX and investment fund Alameda Research at one point was buying Super Bowl ads and had naming rights to a Miami stadium. At its peak in 2021, FTX had more than 1 million users and was the third-largest trader in digital currency by volume.
Bankman-Fried and his top deputies, prosecutors said, took customers’ money out of FTX and put it into Alameda Research.
“The criminality here, it’s massive in scale,” prosecutor Nicolas Roos said Thursday, according to the Washington Post. “It was pervasive in all aspects.”
Bankman-Fried’s local ties were largely unknown, or at least ignored, until he filed for bankruptcy in November 2022.
A review of court files listed vast deposits, more than $50 million, that had been parked by Alameda Research into the one-branch Farmington State Bank, located in tiny Farmington, Washington.
Search for a charter
Farmington State Bank was founded in 1897, and its first charter with the FDIC was dated 1929. It served as the only banking institution in a town of about 150 residents. It was listed as the 26th-smallest bank of some 4,800 nationwide.
But everything changed in 2020 when the bank’s charter was purchased by holding company FBH Corporation, which is controlled by Jean Chalopin.
Chalopin is also the founder of Deltec International Group, which is based in the Bahamas. Deltec, according to published reports, has rebuilt its business model to serve cryptocurrencies, which are used as units of exchange through computer networks that are not reliant on security backing from governments or banks.
FTX, founded by Bankman-Fried and also based in the Bahamas, and its investment arm, Alameda Research, became business partners with Deltec.
Just days before announcing it received an $11.5 million capital investment from Bankman-Fried’s Alameda Research, Farmington officials issued a news release in 2022 indicating it was forming Moonstone Bank.
Chalopin, the bank owner, was quoted in that release saying that the Alameda investment “signifies the recognition, by one of the world’s most innovative financial leaders, of the value of what we are aiming to achieve. This marks a new step into building the future of banking.”
At the time, cryptocurrency traders were desperately seeking avenues to legitimize trading in the traditional banking system. It appears Chalopin, and others he brought along, saw Farmington as that foot in the door.
Moonstone brought in Joseph Vincent, who for 18 years served as director of legal and regulatory affairs for the states banking watchdog, the Washington State Department of Financial Institutions.
But after he resigned in 2021, he became legal counsel for Moonstone. Vincent previously had written extensively online about the future of cryptocurrency trading through traditional banks.
“Right now, there is a window of opportunity for which only a few places on earth have the concentration of tech talent and a reputation of world trade that could make them (or sustain them as) pre-eminent in both trade finance and international” exchange of currency for goods or services between two businesses or “B2B payments,” Vincent wrote before he joined Moonstone.
However, the FTX bankruptcy occurred before the Moonstone-fueled banking revolution could occur.
After FTX filed for bankruptcy, regulators began a mad search for Alameda Research funds. Some $50 million was seized in January 2023 from Farmington under name of “FTX Digital Markets,” according to court records.
Not long after, Moonstone and Farmington began to shed employees.
The bank, one of the few businesses still operating in the Whitman County farming town, sent its customers a letter in August 2023 that their deposits and bank accounts have been sold to the Bank of Eastern Oregon, which has a branch in Colfax.
According to FDIC records, Farmington State Bank ceased operations on Aug. 31, 2023.
Bank of Eastern Oregon CEO Jeff Bailey said in an earlier interview that he looked forward to taking in the former customers from Farmington.
“One thing we have been successful at through the years is serving our farmers and ranchers, and helping our communities survive both in good and bad times,” Bailey said. “We look forward to expanding our services in Whitman County with new customers.”
The Washington Post contributed to this story.