Moonstone Bank is Closing the Accounts of its Crypto Clients to ’Refocus on Community Bank Role’
Moonstone Bank, a digital bank focused on serving high-net-worth individuals, has revealed that it is exiting the crypto space and will be refocusing on the "community bank" role.
In a Thursday press release, the bank said it is halting plans to develop banking services for innovative industries like crypto. Moonstone cited the recent developments in the industry and the subsequent rise in regulatory scrutiny as the reason for its decision. It said:
"The change in strategy reflects the impact of recent events in the crypto assets industry and the resultant changing regulatory environment relating to crypto asset businesses."
As part of this change, the bank will no longer use the name Moonstone Bank and will be rebranding and re-adopting the Farmington State Bank name, known in the local community for 135 years.
Moonstone was reportedly acquired by Jean Chalopin, the Bahamas-based chairman of Deltec, another FTX banking partner in 2020. He allegedly aimed to turn Moonstone into a crypto-focused financial services firm.
Chalopin secured an $11.5 million investment from Alameda Research, the trading arm of Sam Bankman-Fried's crypto exchange FTX, in early 2022. He has also inked several other deals with FTX, and also maintained close ties with executives there.
Meanwhile, Moonstone has also been dragged into the FTX saga. In a December 7 letter sent to Federal Reserve Chairman Jerome Powell, Federal Deposit Insurance Corporation Acting Chair Martin Gruenberg, and Acting Comptroller of the Currency Michael Hsu, Senators Elizabeth Warren and Tina Smith sought details about Moonstone's exposure to Alameda.
''While the banking system has so far been relatively unscathed by the latest crypto crash, FTX's collapse shows that crypto may be more integrated into the banking system than regulators are aware,'' the letter said.
In a December court filing, Bahamas liquidators revealed that Moonstone held nearly $50 million in FTX funds across two accounts, the status of which is unknown. Moonstone executives have allegedly declined to provide Bahamian investigators with details about the accounts when asked to do so.
Aside from Moonstone, other FTX-linked banks have also faced troubles over the past couple of months following the exchange's implosion. As reported, Silvergate Capital, a crypto-focused bank, suffered a bank run following the FTX collapse, which forced the company to sell assets at a significant loss in order to honor $8.1 billion worth of customer withdrawals.
Signature Bank, another FTX financier, has also secured billions of dollars in loans from the Federal Home Loan Bank of New York. The bank has reportedly received $11.3 billion in loans from the consortium.