SPOKANE — Farmington State Bank, with its tiny historic building and big online aspirations that ensnared it in the snowballing collapse of cryptocurrency trader FTX and its CEO Sam Bankman-Fried, has sent letters to its customers announcing its impending closure.
The bank, one of the few businesses still operating in the Whitman County farming town of about 150 people, sent its latest announcement Tuesday telling customers that their deposits and bank accounts have been sold to the Bank of Eastern Oregon, which has a branch in Colfax.
Josey Booth, Farmington’s director of business operations, confirmed that the Bank of Eastern Oregon has acquired Farmington’s accounts held by borrowers and depositors.
“The branch will be closing, and we are starting to work though the process of dissolution,” Booth said. “We don’t have a final date yet, so it’s probably going to be in the next month or so.”
The bank’s demise comes after it its online subsidiary, Moonstone Bank, was thrust into national news over its one-time connection to Bankman-Fried.
The overall deposits of the bank, according to the Federal Deposit Insurance Corporation or FDIC, dropped from $98.9 million last September to about $16.3 million as of June 30.
That drop in deposits included the $50 million seized by federal investigators who alleged a wide-ranging scheme by Bankman-Fried’s FTX to defraud investors through his massive cryptocurrency exchange business.
“It’s unfortunate that the state of Washington has lost another community bank serving small, rural towns in Eastern Washington,” said Greg Deckard, chairman and CEO of State Bank Northwest in Spokane. “I’m happy to see there is still local representation for these clients in Farmington, but it’s sad to see another town lose its only bank.”
Deep roots
Booth said the branch can be traced back to the Bank of Farmington in 1897. Its current charter as Farmington State Bank dates to 1929. It’s operated in same one-story building since 1911, when it moved out of offices located over the top of a saloon.
But seeds of its demise were planted 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 was built 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, was a cryptocurrency exchange that at its peak in 2021 had more than 1 million users and was the third-largest trader in digital currency by volume.
FTX and its investment arm, Alameda Research, were also major 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 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.”
But everything began to unravel on Nov. 11, when Bankman-Fried suddenly announced he was filing for Chapter 11 bankruptcy.
It’s not clear when Bankman-Fried’s FTX Digital Markets deposited the $50 million into Moonstone Bank, but that became the focus of federal investigators in January.
Booth, the Farmington business manager, said the U.S. Department of Justice was trying to find missing assets from the FTX group of companies.
“Knowing that they had been an investor in us and had just opened an account, (federal investigators) had requested that any bank that had funds to freeze those until the federal agencies could determine what to do with them,” Booth said. “In fact, we did. We froze those funds for the benefit of the federal investigators. Ultimately, we turned those over.”
Booth confirmed that seizure contributed the massive drop of the bank’s deposits, from about $98.9 million last fall to $16.3 million in June.
At its peak, both Farmington and Moonstone, which ceased to exist earlier this year, had 32 employees.
The current number on the FDIC report is 12, and Booth said many of those were working reduced hours.
“There’s a lot of concern that this branch, that has been here for so many years, is not going to remain open,” Booth said. “But, this is a win-win scenario. The bank that stepped in to acquire our customers is actually a really good fit.”
New bank
The Bank of Eastern Oregon, which does business in Colfax as the Bank of Eastern Washington, was founded in 1945 when 25 farmers each pooled $1,000 together, president and CEO Jeff Bailey said.
The bank has 20 branches in Eastern Oregon and southeast Washington, including Colfax, which is about 26 miles southwest of the Farmington bank.
He said FDIC officials have not technically approved the purchase of the Farmington assets, but it could come any day.
“We are progressing with the project as if it is a go on Aug. 31,” Bailey said. “I have no reason to believe that it will not get approved.”
Bailey, based in Heppner, Oregon, said he only knows about Moonstone’s connection to FTX based on what he has read in published reports.
“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.”
