The Federal Reserve took action against Farmington State Bank on August 17, alleging that the bank had adopted a stablecoin strategy without notifying regulators or getting approval.
The US government agency said it approved Farmington’s application to become a bank holding company in 2020, after which it imposed certain conditions on the bank and its main shareholder, Jean Chalopin. Those conditions prevented the bank from changing its business plan and taking certain actions without approval.
Farmington allegedly breached those terms in 2022 when it began working with a third party on IT infrastructure for a public stablecoin. The bank allegedly received 50% of the coin and fire fees on certain stablecoins.
The third party and stablecoin in question were not identified in the Federal Reserve report. However, previous announcements suggest that Farmington, then operating as Moonstone Bank, partnered with Fluent Finance for its US+ stablecoin in 2022.
US+ appears to be a fairly small stablecoin as reserve data suggests it has just $194,286 in support. Presumably the same amount is in circulation.
Farmington says it will close
Farmington State Bank said on Aug. 17 it will wind down operations, adding that it has agreed to the Federal Reserve’s latest order.
The bank said it would liquidate and wind down the business. It also said that the Bank of Eastern Oregon would purchase its assets, take over its deposits in a transaction and that registration filings have been received. Farmington said the transaction is expected to close on Aug. 31, while the Federal Reserve’s own notice says Farmington entered into a purchase agreement on May 12.
Farmington already attracted attention in January. At that point, it discontinued its cryptocurrency services and returned to its current role as a community bank. That change also saw the rebranding of the bank from Moonstone Bank to Farmington State Bank.
Reports on Jan. 24 highlighted the bank’s ties to FTX founder Sam Bankman-Fried, whose assets were seized through the bank earlier that month. Those asset seizures were not acknowledged in the Federal Reserve’s latest action.
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