The US Federal Reserve has taken enforcement action against Farmington State Bank and its holding company, FBH Corp. The action comes as Farmington, which was previously known as Moonstone Bank, is in the process of winding down its operations. According to the Federal Reserve, the enforcement action is aimed at protecting the bank's depositors and the Deposit Insurance Fund.
Farmington State Bank, founded in 1887 in a rural town in Washington state, had been offering traditional banking services and loans to local residents and farming operations for many years. However, the bank drew scrutiny when it was revealed that Alameda Research, a hedge fund co-founded by former FTX CEO Samuel Bankman-Fried, had invested $11.5 million in the bank to acquire a non-controlling stake.
After the investment from Alameda, Farmington State Bank underwent a change in its operations, shifting its focus to emerging areas such as cryptocurrency. The Federal Reserve stated that the bank made this change without providing proper notification to its bank regulators or obtaining prior approval.
As part of the enforcement action, Farmington and FBH Corp are prohibited from making dividends or capital distributions, dissipating cash assets, and engaging in certain activities without first obtaining approval from their supervisors. The order also requires the bank to preserve records and prohibits them from acquiring any additional brokered deposits.
Farmington State Bank announced in January of this year that it would be halting its plans to develop services for the digital asset and cannabis industries. In May, the bank agreed to sell its loans and deposits to the Bank of Eastern Oregon voluntarily.
Overall, the Federal Reserve's enforcement action against Farmington State Bank and FBH Corp aims to ensure a proper winding down of the bank's operations while protecting the interests of its depositors and the stability of the financial system.