Home CryptocurrencyBitcoin FTX’s stake in the US bank raises concerns about banking loopholes

FTX’s stake in the US bank raises concerns about banking loopholes

by SuperiorInvest

The bankruptcy proceedings of the FTX cryptocurrency exchange revealed many new aspects of its unethical practices. The latest revelation of its stake in one of the smallest banks in the United States from rural Washington has raised new concerns about its operations and alleged abuse of banking loopholes.

Farmington State Bank in Washington state, now renamed Moonstone, is the 26th smallest bank in the US with a single branch and three employees. FTX invested in the rural bank through its now-bankrupt Alameda sister company with an $11.5 million investment in its parent FBH in March 2022. Alameda’s investment was more than double the bank’s $5.7 million value, reported The New York Times.

Owning FTX in Moonstone is seen as a step to circumvent the requirements of owning a US banking license, which many say is quite a difficult task.

One Reddit user he wrote that getting a banking license takes a lot of work, so “buying a small bank is often a back door to getting a license that would be a natural part of the business plan for something like FTX”.

Another user pointed to the alleged abuse of banking loopholes and the lack of regulatory oversight of cryptocurrencies. Others have speculated that Sam Bankman-Fried’s political connections may have played a role in the deal as well he said:

“With the amount of political connections the SBF had, I wouldn’t be surprised if he just got that license for no reason.”

In addition to FTX’s stake in the American bank, what has drawn more attention from the crypto community is the connection between the parent company of rural bank FBH and another crypto entity, Tether, currently the largest stablecoin issuer in the crypto market.

Related: How Will the FTX Collapse Affect Dubai’s Crypto Ecosystem?

The chairman from FBH is Jean Chalopin, who also happens to be the chairman of Deltec Bank, which has Tether and Alameda on its client list. After buying the bank in 2020, FBH applied for Federal Reserve approval nearly 100 years after the bank was founded to facilitate cryptocurrency-related transactions. The bank received federal approval in June 2021, and nine months later, FTX invested in a rural bank that now has Federal Reserve approval.

The banking connection between Tether and FTX/Alameda has become a concern for many in the crypto community, as Tether itself has long been under scrutiny for reserve audits. Tether did not respond to Cointelegraph’s requests for comment at press time.

Source Link

Related Posts

%d bloggers like this: