Background: FTX and Bank Ventures

The demise of cryptocurrency exchange FTX has sparked a treasure trove of revelations, particularly regarding its questionable dealings. One such eyebrow-raising maneuver involves FTX’s substantial stake in a seemingly innocuous rural bank, now known as Moonstone.

The Investment: A Deep Dive

FTX, through its now-fallen sister company Alameda, splashed a remarkable $11.5 million into the parent company of Farmington State Bank (renamed Moonstone) in March 2022. This investment was more than double the actual bank’s valuation of $5.7 million, inviting speculation about FTX’s intentions and methods of wrangling banking privileges.

The Banking Loophole

Experts argue that acquiring a small bank can act as a sneaky back door to sidestepping the arduous task of obtaining a banking license in the U.S. As one Reddit user quipped, getting a banking license is no casual weekend project. Instead, it’s a Herculean task. Therefore, this acquisition might have been the crypto equivalent of trying to sneak a full pizza into a movie theater in your oversized jacket.

Reactions from the Crypto Community

The crypto community has had mixed reactions. A spokesperson from Tether defended against accusations from The New York Times, alleging misreporting and overly broad strokes on the regulatory concern of the industry.

“This is what led them to miss the actual bad actors in the crypto industry,” said the Tether representative.

In other words, “Hey, why are you picking on us? We weren’t even there!”

The Tether Connection

Moreover, the plot thickens with the relationship between Farmington’s parent company FBH and Tether. FBH’s chairman, Jean Chalopin, also chairs Deltec Bank, which counts both Tether and Alameda as clients. This web of connections elicits a chorus of whispers about potential behind-the-scenes shenanigans, raising concerns about the integrity of Tether’s finances amid ongoing scrutiny.

The Bigger Picture: Regulation in the Crypto World

The whole saga sheds light on the need for clearer regulations in the crypto sphere. As crypto continues to juggle rampant growth and financial instability, the lack of check-and-balance measures faces increasing scrutiny. More importantly, it emphasizes a crucial point—the necessity of keeping an eye on questionable banking practices that can undermine the entire system.