FTX Ownership of U.S Bank Raises Concerns

Several revelations have cropped up in the wake of the FTX liquidity crisis and its bankruptcy proceedings. Some of the exchange’s unethical practices including its strategy of plunging customers’ funds into unregulated business were equally uncovered. The latest surprising stunt is the connection between FTX Derivatives Exchange and one of the United States’ smallest banks.

Investigators have discovered that bankrupt FTX has a stake in Farmington State Bank in the state of Washington, which is now known as Moonstone.

The exchange invested in Moonstone through its sister trading firm Alameda Research by plunging $11.5 million into the bank’s parent company FBH at the beginning of the year. Notably, this investment was worth more than double the bank’s value ($5.7 million) at the time.

While Moonstone is the 26th smallest bank out of 4,800 with only three employees in its single branch, many perceive FTX’s stake in the bank through Alameda Research as a strategy to boycott the requirement of obtaining a banking license. This is because the process of obtaining one is a herculean task. 

FTX Uses Back Door to Operate U.S Bank

According to a person familiar with the process, getting a banking license is so complex that “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.”

Many people believe that the founder of the FTX exchange Sam Bankman-Fried who resigned just as it filed for bankruptcy has political connections which played a crucial role in securing the financial institution.

Speaking, a user said, “With the amount of political connections SBF had, I would not be surprised either if he just got that license for no reason.”

With all these in mind, the crypto community judged that this is an issue of bank loophole misuse and further emphasis on the lack of a robust crypto regulatory framework. Another discovery is the fact that Moonstone’s parent company FBH also has connections with Tether, the largest issuer of a stablecoin in the crypto market currently.

Upon more investigation, a link between Tether, FTX through Alameda Research has been disclosed.