The Federal Reserve Board placed restrictions on Washington-based Farmington State Bank after taking issue with how the liquidating financial institution changed its business plan without seeking proper approvals.
The Fed published a cease-and-desist order with the bank Thursday. It said in a press release the order “ensures the bank’s operations will wind down in a manner that protects the bank’s depositors and the Deposit Insurance Fund.” Farmington State Bank previously announced its plans to voluntarily sell its loans and deposits to the Bank of Eastern Oregon by Aug. 31.
Farmington State Bank gained attention late last year over its ties to FTX, the digital asset exchange run by Sam Bankman-Fried that filed for bankruptcy in November. Bankman-Fried was subsequently arrested and charged with fraud; his trial is set to begin in October.
The Fed criticized Farmington State Bank’s engaging in activities related to digital assets without notifying its supervisors and obtaining prior approval. Doing so violated its commitments to not “change the bank’s business plan to pursue a strategy focused on digital banking services or digital assets, or to launch a digital banking application to the general public, without receiving prior approval from the Board of Governors or the Reserve Bank for a change in the general character of the bank’s business,” the Fed said in its order.
The bank has ceased its activities in the digital assets space. The order also prohibits it from making dividends or capital distributions, dissipating cash assets, and engaging in certain activities without approval from its supervisors.
“Farmington State Bank looks forward to working with the Federal Reserve and the Washington [Department of Financial Institutions] on the orderly liquidation and wind down of the bank,” the bank said in a press release.