Crypto Critics' Corner

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Episode 136 – Moonstone Bank: FTX, Deltec, and the Mission to Move Millions

Moonstone Bank: FTX, Deltec, and the Mission to Move Millions – Crypto Critics' Corner

Bennett and Cas discuss Farmington State Bank/Moonstone Bank, the Washington State bank that Alameda Research invested in – valuing at an unbelievable $150 million. Additional resources: Initial Protos coverage of Moonstone https://protos.com/the-curious-case-of-ftx-and-farmington-state-bank-aka-moonstone/ Moonstone Bank executives explain relationship with Alameda Research https://protos.com/exclusive-moonstone-bank-explains-ties-with-alameda-research/ Federal Reserve explains Moonstone Bank decision https://protos.com/exclusive-the-fed-responds-to-the-moonstone-bank-mystery/ Protos coverage of Federal Reserve cease and desist https://protos.com/alameda-funded-bank-farmington-state-gets-cease-and-desist-from-fed/ Federal Reserve cease and desist https://www.federalreserve.gov/newsevents/pressreleases/files/enf20230817a1.pdf Litecoin acquires stake in bank https://www.coindesk.com/markets/2018/07/11/litecoin-foundation-acquires-99-of-bank-in-payments-partnership/

Cas Piancey and Bennett Tomlin discuss Farmington State Bank/Moonstone Bank, the Washington State bank that Alameda Research invested in.

This episode was recorded on October 12th, 2023.

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English Transcript:

00:00:05:03 - 00:00:11:18
Cas Piancey
Welcome back, everyone. I am Cas Piancey, and I'm joined as usual, by my partner in crime, Mr. Bennett Tomlin. How are you?

00:00:11:18 - 00:00:12:21
Bennett Tomlin
I'm doing well. How are you, Cas?

00:00:12:21 - 00:00:23:20
Cas Piancey
Good. Annoyed. It's been a dumb week for everyone in the world. Basically, there's just so many stupid stories going on right now, But we're focused on

00:00:23:20 - 00:00:25:19
Cas Piancey
Moonstone Bank today,

00:00:25:19 - 00:00:31:19
Cas Piancey
which in a sense is related to the ongoing drama of FTX and Alameda Research,

00:00:31:19 - 00:00:36:00
Cas Piancey
where we've been doing some coverage in regard to the trial as well.

00:00:36:00 - 00:00:44:06
Cas Piancey
But yeah, Moonstone Bank is a particular and very niche topic, but it deserves kind of an examination of its own.

00:00:44:08 - 00:00:50:04
Cas Piancey
I guess I just want to get us started with the very basic facts of what Moonstone was so

00:00:50:04 - 00:00:51:12
Cas Piancey
Farmington Bank

00:00:51:12 - 00:00:53:18
Cas Piancey
established in the 1800s. This was

00:00:53:18 - 00:00:56:23
Cas Piancey
small community bank located in eastern Washington State.

00:00:56:23 - 00:01:10:05
Cas Piancey
basically served farmers that were locally in this very, very small town of Farmington. Farmington has, I think, even right now, like something like 250, 300 people or something like that incredibly tiny little town.

00:01:10:05 - 00:01:12:10
Cas Piancey
Farmington got bought by a

00:01:12:10 - 00:01:15:19
Cas Piancey
Hong Kong citizen who was naturalized

00:01:15:19 - 00:01:17:18
Cas Piancey
English, I believe. So He was an

00:01:17:18 - 00:01:19:19
Cas Piancey
English citizen of Hong Kong.

00:01:19:19 - 00:01:29:01
Cas Piancey
He purchased the bank in the 1990s and held on to it for 20 years and then he sold it and he's and the gentleman that he sold it to

00:01:29:01 - 00:01:29:16
Cas Piancey
is

00:01:29:16 - 00:01:32:13
Cas Piancey
Jean Chalopin, who is a

00:01:32:13 - 00:01:39:03
Cas Piancey
incredibly wealthy banker, but also the creator of the famous cartoon Inspector Gadget and a handful of other cartoons.

00:01:39:03 - 00:01:40:15
Cas Piancey
He is the

00:01:40:15 - 00:01:47:07
Cas Piancey
owner of a large bank in the Bahamas known as Deltec Deltec Bank and Trust.

00:01:47:07 - 00:01:48:17
Cas Piancey
Deltec serves as

00:01:48:17 - 00:01:57:07
Cas Piancey
or served as the main bank for Tether and also served FTX and Alameda Research. They served a lot of cryptocurrency companies.

00:01:57:07 - 00:01:58:14
Cas Piancey
And he purchased

00:01:58:14 - 00:02:01:00
Cas Piancey
Farmington State Bank in,

00:02:01:21 - 00:02:02:18
Cas Piancey
But do you want to take it from there?

00:02:02:18 - 00:02:03:04
Cas Piancey
Bennett

00:02:03:04 - 00:02:19:18
Bennett Tomlin
Jean Chalopin went out and purchased this bank, this small bank in the United States, and this is something that Deltec executives have discussed doing before in their publications and stuff about how going to acquire this type of bank effectively gets you the banking license without some of the other headaches.

00:02:19:18 - 00:02:51:16
Bennett Tomlin
Later, in 2021, Alameda Research agreed to invest 11.5 million into Moonstone bank owning 9.9% of it and valuing the bank at 115 million. Besides this investment into Moonstone Bank by Alameda Research, 50 million of the deposits at Moonstone, which is basically all of the deposits at Moonstone came from FTX funds. Besides that 50 million, there was an additional $50 million loan from FTX to

00:02:51:16 - 00:02:58:03
Bennett Tomlin
Deltec around the same time that Alameda Research made this $11.5 million investment.

00:02:58:05 - 00:03:37:23
Bennett Tomlin
So the reason Moonstone is so important is because there was this attempt by the chairman of the Bank of Cryptocurrency in the Bahamas and the CEO of this important trading firm and exchange, Sam Bankman-Fried, to go out and attempt to gain control of this small community bank, fill it with cryptocurrency funds, and then the stated plan from like Janvier, the chief marketing officer of the firm, was to try to push this to be like the future of online banking, serve cryptocurrency, serve cannabis, and create a new experience of online banking that people outside of the small community of Farmington could access.

00:03:38:04 - 00:03:45:22
Bennett Tomlin
And so that's how we go from like this very small bank to suddenly being a much larger bank with ties to criminal behavior.

00:03:45:22 - 00:03:53:18
Cas Piancey
so what they did is once they had purchased this bank once Jean Chalopin had bought Moonstone,

00:03:53:18 - 00:04:09:04
Cas Piancey
almost immediately he made the move to transfer the regulatory oversight of Farmington to the Federal Reserve. So initially, smaller banks like this, state chartered banks, banks that aren't doing a lot of, you know, global transactions and

00:04:09:04 - 00:04:12:18
Cas Piancey
bigger transactions generally, they prefer the

00:04:12:18 - 00:04:17:20
Cas Piancey
regulatory purview of the Federal Depositors Insurance Corporation, the FDIC,

00:04:17:20 - 00:04:20:14
Cas Piancey
just because I think that

00:04:20:14 - 00:04:21:22
Cas Piancey
the regulatory guidelines

00:04:21:22 - 00:04:24:21
Cas Piancey
for the FDIC are are little looser.

00:04:24:21 - 00:04:47:12
Cas Piancey
I don't know if that's the right I don't want to I don't want to make the suggestion that the FDIC is not monitoring things and not doing a great job of regulating. That's not my point. But that this smaller bank and smaller banks in general choose to choose the regulatory purview of the FDIC. He moved to have the bank regulated by the Federal Reserve.

00:04:47:12 - 00:05:02:21
Cas Piancey
The one promise made during this regulatory transfer was that Farmington would not be altering its business massively, that it especially wouldn't be altering its business massively in the sense of taking on things like cryptocurrency or cannabis.

00:05:02:21 - 00:05:06:07
Cas Piancey
They almost immediately went against this promise,

00:05:06:07 - 00:05:06:21
Cas Piancey
they

00:05:06:21 - 00:05:16:23
Cas Piancey
almost instantly changed their name from Farmington to doing business as Moonstone as in to the moon, cryptocurrency and stone like stoned marijuana.

00:05:17:04 - 00:05:27:13
Cas Piancey
So they they're taking on these two businesses that federally are struggling and having a lot of issues and aren't being accepted widely by the banking system in America.

00:05:27:13 - 00:05:30:12
Cas Piancey
And they're diving headfirst into it.

00:05:30:12 - 00:05:39:09
Cas Piancey
what was surprising for me and many other individuals who covered this and watched as it unfolded was that the Federal Reserve didn't do anything to stop this.

00:05:39:09 - 00:05:46:18
Cas Piancey
And I think part of this is that as the new regulator took over and started monitoring it, there was this

00:05:46:18 - 00:05:49:19
Cas Piancey
six month year long period of this transition

00:05:49:19 - 00:05:57:11
Cas Piancey
from the FDIC regulating them to the Federal Reserve, regulating them. And during that time, they could do nearly whatever they wanted.

00:05:57:11 - 00:06:18:20
Bennett Tomlin
And so I think you're kind of getting at exactly what the point of this move is by switching from FDIC to the Federal Reserve. They started their path towards eventually getting like a Federal Reserve master account and access to like the Federal Reserve's interbank settlement systems and things like that. And they were able to take advantage of kind of the initial scrutiny when they made their request to become Federal Reserve regulated.

00:06:19:00 - 00:06:41:18
Bennett Tomlin
And as you kind of pointed towards, there was looser oversight for the period immediately after that where they were then able to take on this investment from Alameda Research, bring in the new executive team and relaunch with this changed business model. And I guess they hoped that by the time the Federal Reserve came back to check on them, the business model would be doing good and they could beg for forgiveness instead of asking for permission.

00:06:41:18 - 00:06:52:16
Cas Piancey
As they decide to get involved with cryptocurrency banking and cannabis banking, I honestly have no idea how much they helped bank the cannabis business in Washington.

00:06:52:16 - 00:07:00:10
Bennett Tomlin
I think it was a goal more than like a thing they actually did based on like the amount of deposits in what percent. We know were FTX.

00:07:00:10 - 00:07:07:18
Cas Piancey
Right. And so, like, that brings us to the point of very shortly thereafter this purchase and this switch of regulatory regime.

00:07:07:20 - 00:07:10:07
Cas Piancey
We have this investment by Alameda Research

00:07:10:07 - 00:07:19:21
Cas Piancey
worth $11.5 million and valuing the bank, which again, guys, this is an incredibly small bank with very few depositors and not

00:07:19:21 - 00:07:25:00
Bennett Tomlin
Yeah, the bank's total assets. Just to be clear, before Alameda made their investment was like 5 million

00:07:25:00 - 00:07:30:10
Bennett Tomlin
Alameda, like, invested double their total assets at the time in exchange for less than 10%.

00:07:30:10 - 00:07:36:10
Bennett Tomlin
I think it was less than 10% too. So they could avoid certain reporting obligations if they owned more than 10% of the bank.

00:07:36:10 - 00:07:36:21
Cas Piancey
That's right.

00:07:36:21 - 00:07:41:06
Cas Piancey
people who aren't familiar with this way, it's not just a banking thing.

00:07:41:07 - 00:07:48:23
Cas Piancey
any publicly traded company, for instance, a famous example of this is Elon Musk purchasing roughly 9.9% of Twitter

00:07:48:23 - 00:07:56:08
Cas Piancey
so that he could become a shareholder, but didn't have to do any specific things to get that that board chair seat or whatever.

00:07:56:08 - 00:07:58:18
Cas Piancey
Ultimately, he ended up buying Twitter, so it didn't matter. But

00:07:58:18 - 00:08:05:05
Cas Piancey
similar things happen in business all the time. I think what's interesting here is that, like you said, it valued a very tiny bank,

00:08:05:05 - 00:08:24:21
Cas Piancey
one of the top like five smallest banks in America. It valued it at $115 million, which is I don't know, it's unheard of. But we know how Alameda Research and FTX were doing their investing, which was to dump money everywhere to whoever wanted it.

00:08:24:21 - 00:08:26:20
Bennett Tomlin
I don't think that's what this is.

00:08:26:20 - 00:08:28:20
Cas Piancey
This is you're right. This is not anywhere to whoever

00:08:28:20 - 00:08:32:14
Bennett Tomlin
I think this is more like HiveEx than Anthropic. For example.

00:08:32:14 - 00:08:34:19
Cas Piancey
right. You're 100% agree with you. But

00:08:34:19 - 00:08:39:21
Cas Piancey
let me put it this way. This was obviously overvalued. Why was this obviously overvalued? Well, there's

00:08:39:21 - 00:08:41:22
Bennett Tomlin
Is it conspiracy or stupidity?

00:08:41:22 - 00:08:49:23
Cas Piancey
There's where we get into the interesting part because for some of this stuff, like like we've seen in the trial, you mentioned Anthropic, where they gave them half a billion dollars

00:08:49:23 - 00:08:56:23
Cas Piancey
because they had an idea, which is incredible. And I would love half a billion dollars for an idea.

00:08:56:23 - 00:08:59:04
Bennett Tomlin
Well, I have at least one idea first.

00:08:59:04 - 00:09:04:04
Cas Piancey
well, okay. I mean, that's where I'm screwed.

00:09:04:06 - 00:09:05:01
Cas Piancey
CasCoin!

00:09:05:01 - 00:09:28:18
Cas Piancey
The difference here is that they ended up valuing a very small U.S. bank for $115 million, and it seemed to provide them with an ability to access the U.S. banking system that they otherwise might not have. They obviously were doing banking with signature, with silvergate, with some other banks. But man, how great would it be if you could own part of a bank so that they couldn't couldn't kick you out as a client ever?

00:09:28:22 - 00:09:38:00
Cas Piancey
Right. And I think you're right. That's where we start going. Like this looks closer to a conspiracy than it does to simple stupidity or arrogance.

00:09:38:00 - 00:10:09:05
Bennett Tomlin
To me, it feels a lot like and I'm going to draw two comparisons here. It feels a lot to me. Like if hypothetically, you were a very large stablecoin who didn't have banking and you needed access to banking, so you agreed to, like, buy the house next to the CEO of a bank and then become have your executives become directors of a related entity, but not the bank itself, because you don't want that kind of disclosure and maybe you do some investing in that other entity related to that hypothetically feels a lot like this, you know?

00:10:09:10 - 00:10:19:19
Bennett Tomlin
But I mean, it wasn't a stablecoin the other one. And there's a video on this channel entitled FTX's Misadventures in Australia, where I discuss an over-the-counter trading desk that was started by

00:10:19:19 - 00:10:35:16
Bennett Tomlin
Fred Sebastian and Frank Restuccia in Australia called HiveEx. HiveEx was this very small over-the-counter trading desk. Literally does not matter except for what Alameda Research bought it and used it for. Fred

00:10:35:16 - 00:10:56:14
Bennett Tomlin
Esther, the founder of HiveEx, also purchased a minority stake in a local bank Goldfields bank in Australia, and then hired an executive at HiveEx who they put in charge of bank account brokering. At this point, HiveEx starts advertising their ability to get crypto companies banked after buying the stake in the bank and hiring this new executive.

00:10:56:16 - 00:11:15:12
Bennett Tomlin
And shortly after this Sam Bankman-Fried comes in and buys it for a couple hundred thousand dollars. Immediately, like days after the transaction is actually closed and you can see Sam Bankman-Fried name come up on the register on ASICs FTX starts advertising that Australian users can deposit to by sending money to HiveEx

00:11:16:05 - 00:11:17:16
Bennett Tomlin
and it was purchased by Alameda Research.

00:11:17:16 - 00:11:43:18
Bennett Tomlin
Sam Bankman-Fried was a director, etc. And so I think that that is probably what the end goal of Moonstone was, is that it would be another way for them to have bank accounts in FTX’s name and be reasonably assured that they weren't going to lose that rail. The story of FTX and we talked about this in the episode I was editing today before we started recording, is that in part they could not find a reliable banking partner in many crypto companies could not find reliable banking partners.

00:11:44:00 - 00:11:54:13
Bennett Tomlin
And this leads to a variety of bad decisions these companies make. And I think it's possible to frame HiveEx, Farmington, these types of purchases as these companies

00:11:54:13 - 00:12:04:16
Bennett Tomlin
recognizing that they're not really going to be able to get access to these accounts in the way most people would and are saying that the only solution left is to start throwing around money.

00:12:04:16 - 00:12:16:15
Cas Piancey
I just remembered I don't know if anyone else remembers this who's listening. You probably remember Bennett but in 2018, Litecoin literally did the exact same thing.

00:12:16:15 - 00:12:17:03
Bennett Tomlin
Yeah. With TokenPay.

00:12:17:19 - 00:12:19:11
Cas Piancey
Yes. TokenPay was a part of this

00:12:19:11 - 00:12:22:15
Cas Piancey
weg bank. AG which I think is now known as 1031 bank.

00:12:22:15 - 00:12:22:23
Cas Piancey
I don't know.

00:12:22:23 - 00:12:32:10
Cas Piancey
But they bought literally a 9.9% share. So here you go. You have a this in this sense, in 2018, it was a foundation of a cryptocurrency

00:12:32:10 - 00:12:35:16
Cas Piancey
purchasing part of a bank to try to ensure payment rails in Europe

00:12:35:16 - 00:12:38:16
Cas Piancey
for their specific cryptocurrency. That's what it seems like

00:12:38:16 - 00:12:42:08
Cas Piancey
as opposed to in this sense where there's layers to it already.

00:12:42:08 - 00:12:44:08
Cas Piancey
So I'm just going to go back really quick.

00:12:44:08 - 00:12:46:13
Cas Piancey
We have a foreign bank owner

00:12:46:13 - 00:12:49:21
Cas Piancey
of the Bahamas based bank Deltec.

00:12:49:21 - 00:12:59:15
Cas Piancey
Already I don't know if people are aware, but generally Caribbean banking, is it has problems. There's corruption problems and money laundering problems and tax evasion issues.

00:12:59:15 - 00:13:07:11
Cas Piancey
So we have a foreign individual purchasing a US community bank and then

00:13:07:11 - 00:13:11:19
Cas Piancey
first of all, putting a family member in charge of kind of everything there at the bank.

00:13:12:00 - 00:13:12:17
Cas Piancey
And then

00:13:12:17 - 00:13:16:20
Cas Piancey
after that going ahead and accepting a very large

00:13:16:20 - 00:13:18:16
Cas Piancey
investment from a

00:13:18:16 - 00:13:20:14
Cas Piancey
cryptocurrency company

00:13:20:14 - 00:13:21:21
Cas Piancey
overvaluing the bank.

00:13:21:21 - 00:13:24:17
Cas Piancey
That's where we are right now. There's already two or three layers to this,

00:13:24:17 - 00:13:26:14
Cas Piancey
but then we have

00:13:26:14 - 00:13:28:10
Cas Piancey
Alameda absolutely doing what

00:13:28:10 - 00:13:30:16
Cas Piancey
we're talking about. Like they started depositing

00:13:30:16 - 00:13:33:04
Cas Piancey
tens of millions of dollars into Moonstone Bank.

00:13:33:04 - 00:13:38:02
Cas Piancey
I don't know if I have the exact data right now, but I think it was $80 million ultimately deposited

00:13:38:02 - 00:13:39:20
Bennett Tomlin
It was 50 million by the end,

00:13:39:20 - 00:13:40:13
Cas Piancey
50 million by the end.

00:13:40:13 - 00:13:42:08
Bennett Tomlin
but there might have been some withdrawals before that.

00:13:42:08 - 00:13:57:11
Cas Piancey
so 50 million deposited by the end, which, you know, in the scheme of things it's not very much, but when you reflect on how many deposits this bank had at the beginning of this purchase, which as you said, was close to 5 million, that's a massive jump.

00:13:57:11 - 00:14:01:18
Cas Piancey
That is a massive, massive jump in deposits and really fast too.

00:14:01:18 - 00:14:04:15
Cas Piancey
as we have the unraveling of FTX and Alameda,

00:14:04:15 - 00:14:10:16
Cas Piancey
this transaction in which was publicly known about and it just wasn't widely, I think, reported on at the time.

00:14:10:16 - 00:14:12:18
Cas Piancey
basically everyone goes, whoa, wait a second.

00:14:12:18 - 00:14:27:00
Cas Piancey
We didn't realize how much money Alameda poured into this really tiny bank. This seems suspicious. And so a bunch of reporters, including us over Protos and I, and we should include some of their coverage from this in the show notes

00:14:27:00 - 00:14:31:10
Cas Piancey
started asking questions over to the individuals at Moonstone

00:14:31:10 - 00:14:32:12
Cas Piancey
and to

00:14:32:12 - 00:14:34:01
Cas Piancey
state and federal regulators.

00:14:34:01 - 00:14:46:08
Cas Piancey
State regulators in Washington basically said like, hey, man, you know, we did everything right. We don't even need any new tools. We don't we didn't do anything wrong. This is all up up to up to par it's it's good. It's up to snuff. It's fine.

00:14:46:08 - 00:14:48:21
Cas Piancey
We reached out to the Fed. The Fed said,

00:14:48:21 - 00:14:51:02
Cas Piancey
quote, You look at a lot of different factors.

00:14:51:02 - 00:15:02:13
Cas Piancey
You look at all the statutes, statutory factors, financial managerial ownership, legal permissibility, business plans, future prospects. Based on the information gathered, we'd move forward.

00:15:02:13 - 00:15:12:00
Cas Piancey
The fact is, you learn new things about people after taking action. You act based on available information at the time. And that's not to say that something might not be known later.

00:15:12:00 - 00:15:33:00
Cas Piancey
Bad things can happen even when you think all things are in order. We try to manage the situation after that, which is to say that even in the first realizations of the public as to what was going on with Moonstone and Farmington Bank, the Federal Reserve was already kind of saying, Well, we make mistakes and we try to fix them.

00:15:33:00 - 00:15:33:14
Cas Piancey
After.

00:15:33:14 - 00:15:40:20
Cas Piancey
And that's, I guess is what ends up happening here. So. So you want to describe what happens with Moonstone Bank after these revelations come to light,

00:15:40:20 - 00:15:49:17
Bennett Tomlin
Shortly after the FTX's bankruptcy is announced, this relationship becomes more widely publicized and investigated. Farmington State Bank

00:15:49:17 - 00:15:57:15
Bennett Tomlin
basically announces that they are transitioning back to their old business model and will not be serving cryptocurrencies or cannabis anymore.

00:15:57:21 - 00:16:24:22
Bennett Tomlin
Shortly after that, the acquisition of Farmington State Bank by another Washington based bank is announced and a few months after that we get a Federal Reserve cease and desist letter that describes how Farmington State Bank had made this agreement when they came under Federal Reserve jurisdiction to not change management teams without approval, to not change business plans without approval, do not significantly change deposit or mix without approval.

00:16:25:00 - 00:16:38:01
Bennett Tomlin
And they did those things. Farmington State Bank got like totally destroyed. They were already being purchased, so it didn't really matter. But like told the cease and desist and all activities were immediately transferred over to the acquiring bank.

00:16:38:01 - 00:16:49:07
Bennett Tomlin
that leaves us with no more Farmington State Bank, no Moonstone bank. And this weird story of how FTX and Alameda Research were trying to buy an American community bank.

00:16:49:07 - 00:16:51:04
Cas Piancey
A cease and desist was issued

00:16:51:04 - 00:16:53:19
Cas Piancey
in August. So only a couple of months ago,

00:16:53:19 - 00:16:55:03
Cas Piancey
by the Federal Reserve.

00:16:55:03 - 00:16:57:02
Cas Piancey
We talked about this in another episode, but

00:16:57:02 - 00:17:06:08
Cas Piancey
I assume that episode will actually come out after this. But basically the cease and desist was given long after everybody involved in the banking industry was aware that they were going to get it

00:17:06:08 - 00:17:09:03
Cas Piancey
Their assets were sold off to the Bank of Eastern Oregon

00:17:09:03 - 00:17:15:12
Cas Piancey
that bank, the CEO, Jeff Bailey, described the cease and desist as not a surprise

00:17:15:12 - 00:17:19:21
Cas Piancey
and that they were going forward with purchasing these assets, these deposits,

00:17:19:21 - 00:17:21:16
Cas Piancey
these loans, etc.,

00:17:21:16 - 00:17:24:09
Cas Piancey
from from the bank. Regardless of that, they knew what was coming.

00:17:24:09 - 00:17:28:03
Cas Piancey
So did the executive leadership over at Farmington Moonstone.

00:17:28:03 - 00:17:42:05
Cas Piancey
they were fully aware that the cease and desist letter would be arriving. None of this was a surprise to anyone, but the public, which again suggests that what the Federal Reserve said to Protos and that they were like, hey, when we see a mistake, well, we go out and we try to fix it.

00:17:42:07 - 00:17:44:05
Cas Piancey
I mean, that's exactly what happened here.

00:17:44:05 - 00:17:48:10
Cas Piancey
they did it quietly and they did it, I guess, soundly.

00:17:48:10 - 00:17:51:10
Cas Piancey
I don't know how many people ended up losing their jobs. Hopefully not that many.

00:17:51:10 - 00:17:55:20
Cas Piancey
I don't know how many people. It sounds like nobody who had loans or deposits at

00:17:55:20 - 00:17:58:09
Cas Piancey
Farmington was hurt in any way.

00:17:58:09 - 00:17:59:14
Cas Piancey
I guess besides

00:17:59:14 - 00:18:00:21
Cas Piancey
Alameda research.

00:18:00:21 - 00:18:01:19
Cas Piancey
And even then,

00:18:01:19 - 00:18:05:14
Cas Piancey
presume that those funds end up going entirely back to the estate.

00:18:05:14 - 00:18:06:22
Cas Piancey
All in all, you have

00:18:06:22 - 00:18:14:19
Cas Piancey
what amounts to a reasonable closing up of this bank. I think what is still lingering as a question here is like,

00:18:14:19 - 00:18:16:04
Cas Piancey
why are we letting

00:18:16:04 - 00:18:22:02
Cas Piancey
owners of Caribbean banks purchase U.S. banks? Why are we letting

00:18:22:02 - 00:18:34:17
Cas Piancey
cryptocurrency funds like Alameda Research, where they clearly weren't doing proper due diligence, they clearly weren't doing proper accounting, they clearly weren't giving truthful, honest answers about their financials to anyone.

00:18:34:19 - 00:18:39:04
Cas Piancey
Why are they able to purchase 10% of a bank in the U.S.?

00:18:39:04 - 00:18:42:21
Cas Piancey
Why were these things allowed? And I don't know if we are going to get an answer to that.

00:18:42:21 - 00:18:44:10
Cas Piancey
It's just kind of the way it is.

00:18:44:10 - 00:19:06:16
Bennett Tomlin
I think we've gotten half and half an answer already. Right. Which is the Federal Reserve telling you, listen, this mostly is allowed. They did some things that weren't allowed. And then we went out and tried to undo the things that they weren't allowed to do in the first place. And it's something we've talked about in a lot of our discussions of regulators where they are not intensely investigating most claims

00:19:06:16 - 00:19:15:02
Bennett Tomlin
the people they regulate, make and are primarily interested in trying to kind of nudge these companies onto the right path and document what went wrong afterwards.

00:19:15:02 - 00:19:31:22
Bennett Tomlin
The other wrinkle that makes this really hard for me to kind of understand is a senior vice president at Deltec that you talked about way back in 2019. Robin Trehan. And what was interesting about Robin Trehan is that he was working for this Bahamian company, but he was based in my neck of the woods out of Chicago.

00:19:32:04 - 00:19:55:02
Bennett Tomlin
And a lot of his writing focused on this process of these international groups going out and buying small community and rural banks in the United States. And this was like explicitly one of these services he advertised on his website that he would make introductions between these various international finance entities in these banks in the United States to facilitate their eventual purchase.

00:19:55:04 - 00:20:17:06
Bennett Tomlin
And so this is something that Deltec did not start doing in 2020 with the purchase of Farmington State Bank. This is not a new business they really like expanded into when Alameda Research gave them $60 million. This is something that has been part and parcel of Deltec business for years and it's not one they mention on any of their websites, interestingly enough.

00:20:17:08 - 00:20:34:18
Bennett Tomlin
But it seems for some reason predating FTX and Alameda Research's involvement in this specific bank, Deltec has had a need for small banks in the United States. And I would love and I worry I'll never get a truly good understanding of why that is.

00:20:34:18 - 00:20:40:01
Cas Piancey
I mean, I think you have a good understanding. I think if what you're suggesting is you wish that you could

00:20:40:01 - 00:20:51:09
Cas Piancey
confirm provably your understanding of why they're doing this. And and I agree with you like I think they do this specifically because these kind of things are very difficult to prove, if not impossible.

00:20:51:09 - 00:20:51:11
Cas Piancey
The

00:20:51:11 - 00:21:01:13
Cas Piancey
the way you could prove it would be that you would need someone inside the bank itself to come tell you that that was what was going on and prove it with data that they had taken from the bank.

00:21:01:19 - 00:21:06:09
Cas Piancey
All of that sounds illegal. All of that sounds like you're breaking many Bank Secrecy Act rules.

00:21:06:09 - 00:21:13:02
Cas Piancey
Ideally, you would have this person seek out a regulator and either do whistleblower protection or, you know, something

00:21:13:02 - 00:21:21:13
Cas Piancey
I don't know. I mean, this is where you go, Shouldn't we have some sort of legal requirements and shouldn't regulators be looking at this and going, well, that's weird

00:21:21:13 - 00:21:24:17
Cas Piancey
I guess I'm saying you don't have to be a genius to go. This is weird.

00:21:24:17 - 00:21:28:14
Cas Piancey
And you'd hope that financial regulators would see it similarly. But okay,

00:21:28:14 - 00:21:38:02
Cas Piancey
if they're not going to see it that way, there's not a lot that we can do about it besides talk about it and hopefully talk about it in such a way that the public perceives it similarly and understands it similarly.

00:21:38:02 - 00:21:49:12
Cas Piancey
I don't know how many banks Deltec or for that matter, any other number of Bahamian, you know, Cayman Islands, BVI, whatever based banks.

00:21:49:12 - 00:21:51:03
Cas Piancey
I don't know how many of these own

00:21:51:03 - 00:22:00:13
Cas Piancey
a small portion or wholly small banks or or other types of banking structures in the United States? Probably plenty of them.

00:22:00:13 - 00:22:16:21
Cas Piancey
Is that a reason for all of them to be shunned and viewed under a microscope? Probably not, but should they get more scrutiny than perhaps an average Joe, American Joe going out and trying to purchase a

00:22:16:21 - 00:22:18:13
Cas Piancey
bank maybe?

00:22:18:13 - 00:22:32:08
Cas Piancey
This isn't about where you're from. This isn't about the color of your skin. It is about being a foreign national and a bank owner in another area of the world and going,

00:22:32:08 - 00:22:34:21
Cas Piancey
why do you need to buy more banks in the US?

00:22:34:21 - 00:22:46:05
Cas Piancey
And asking that question with intention because it's it is odd to be buying these banks, small banks in particular when you're like Deltec is not it's not big in terms of

00:22:46:05 - 00:22:46:20
Cas Piancey
banks throughout the world

00:22:46:20 - 00:22:48:02
Bennett Tomlin
Global finance. Yeah,

00:22:48:02 - 00:22:49:19
Cas Piancey
but it is not a small bank.

00:22:49:19 - 00:22:53:22
Cas Piancey
It was significantly larger at the time than

00:22:53:22 - 00:23:00:09
Cas Piancey
Farmington could ever pray to be. So the idea that they would be interested in them at all is odd

00:23:00:09 - 00:23:01:14
Cas Piancey
Anything else you want to add?

00:23:01:14 - 00:23:05:11
Bennett Tomlin
I think it's just helpful to see how desperate

00:23:05:11 - 00:23:11:16
Bennett Tomlin
Deltec, FTX, and Alameda Research were to maintain access to U.S. banking in U.S. dollars rails.

00:23:11:18 - 00:23:13:11
Bennett Tomlin
That's the moral of the story here.

00:23:13:11 - 00:23:13:17
Cas Piancey
Yep.

00:23:13:17 - 00:23:18:20
Cas Piancey
It'd be great if you guys could leave, like, or review or whatever. Subscribe to the channel

00:23:18:20 - 00:23:22:13
Cas Piancey
if you are interested in supporting us in other ways outside of just that.

00:23:22:13 - 00:23:27:03
Cas Piancey
The CasCoin Foundation did just purchase 9.9% of Chase Bank

00:23:27:03 - 00:23:48:14
Cas Piancey
and we are hoping that we can utilize that ownership to start being able to access the US banking system again. I know it has been a long struggle for a cash coin to have access to the US banking system, but with this purchase I'm hoping to bring Fiat off ramp to cash coin users once again.

00:23:48:14 - 00:23:55:11
Bennett Tomlin
Worst comes to worst, I'm in talks with three European banks and I'm sure anywhere from three months to three years. One of those will be a useful relationship.

00:23:55:11 - 00:23:59:14
Cas Piancey
And even if not three years, you know, ten years, 15 years. Just remember, guys, hold.
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2 responses to “Episode 136 – Moonstone Bank: FTX, Deltec, and the Mission to Move Millions”

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