Bahamian bank, chair under US senate scrutiny on FTX

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian bank and trust company, and its chairman, are coming under increasing scrutiny by US senators over their links to FTX and other entities owned by the collapsed crypto currency exchange’s founder, Sam Bankman-Fried.

Senators Elizabeth Warren and Tina Smith, in December 7, 2022, letters to US financial services regulators including Federal Reserve chairman, Jerome Powell, have raised multiple questions about the level of oversight applied to an $11.5m investment by Mr Bankman-Fried’s trading firm, Alameda Research, in the country’s 26th smallest bank.

That bank, Farmington State Bank, which was subsequently renamed Moonstone Bank, is headed by Jean Chalopin, also chairman of Lyford Cay-based Deltec Bank & Trust. While there is nothing to suggest they have done anything wrong, senators Warren and Smith told Mr Powell that Moonstone and Deltec are just two financial institutions to come under scrutiny over their ties to crypto currencies and digital assets following FTX’s implosion last month.

The duo, voicing concern about growing ties between the traditional banking and crypto currency industries, focused on the $11.5m investment made by Alameda Research in Moonstone Bank, located in Washington state in the north-west US, in March this year.

Pointing out that this investment was “more than double the bank’s worth at the time”, the US senators quoted a former president of the Independent Community Bankers of America as saying: “The fact that an offshore hedge fund, that was basically a crypto firm, was buying a stake in a tiny bank for multiples of its stated book value should have raised massive red flags for the FDIC., state regulators and the Federal Reserve...It’s just astonishing that all of this got approved.”

Ms Warren and Ms Smith added: “FTX is not Moonstone Bank’s only crypto connection. In fact, Moonstone’s parent company, FBH Corp, is headed by the chair of Bahamas-based Deltec Bank, a bank service provider to Tether, a stablecoin issuer and one of FTX’s largest trading partners.

“According to CoinTelegraph: ‘After buying the [nearly 100-year-old] bank in 2020, FBH [a vehicle headed by Mr Chalopin] applied for Federal Reserve approval ... to facilitate cryptocurrency-related transactions. The bank got federal approval in June 2021, and nine months later, FTX invested in the rural bank, now equipped with Federal Reserve approval’.

“Moonstone and Deltec are just two of several banks to have their crypto ties come under scrutiny in the FTX fallout,” the two US senators added. “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system, and highlight potential loopholes that crypto firms may try to exploit to gain further access to banks.

“In the case of Moonstone, FTX’s investment could be ‘seen as a move to bypass the requirements of owning a banking license in the US’. We now know that FTX also had ‘accessed regulated banks otherwise out of reach to the crypto exchange’ by receiving customer deposits through Alameda’s bank accounts.”

A Deltec Bank & Trust spokesperson previously denied to Tribune Business that the Bahamian institution has any links or ties to Moonstone or the $11.5m investment by Mr Bankman-Fried’s Alameda Research. “Deltec Bank has no business or banking relationships with Farmington State Bank (doing business as Moonstone Bank),” they said.

“The only reason Deltec Bank has been mentioned in recent media is due to common shareholdings through businessman Jean Chalopin.” However, the growing scrutiny by US senators will be an unwelcome development for both Deltec and Mr Chalopin who have been trying feverishly to distance themselves from FTX’s collapse and Mr Bankman-Fried.

However, this newspaper previously reported that FTX and entities controlled by Mr Bankman-Fried held no fewer than 17 accounts with Deltec Bank & Trust. Documents produced by John Ray, the newly-appointed chief executive for FTX Trading, disclosed that the latter entity held just one account at Deltec.

However, a further nine were said to be in the name of Alameda Research, the trading/hedge fund entity controlled by Mr Bankman-Fried, and which is thought to have played a central role in the crypto exchange’s week-long implosion.

The remaining seven Deltec accounts were in the name of West Realm Shires Services, a Delaware-based entity also majority-controlled by Mr Bankman-Fried together with fellow FTX co-founder, Gary Wang, and the crypto exchange’s engineering head, Nishad Singh. The 17 Deltec accounts were held in a variety of currencies, including US dollars, euros, Swiss francs, Canadian and Australian dollars, and the UK pound sterling.

Mr Chalopin, who initially made his fortune as the creator of the Inspector Gadget cartoons, also enabled the Albany project in south-west New Providence by selling a key estate parcel to its developers that was often referred to as the property behind ‘the long pink wall’. He was among the speakers at the Crypto Bahamas conference that was staged by Mr Bankman-Fried and FTX earlier this year.

Deltec, which has aggressively embraced the digital assets evolution by setting up its Delchain subsidiary to target this area, has fought hard to distance itself from FTX and Mr Bankman-Fried since the crypto currency exchange imploded. It has vigorously denied that its purchase of Ansbacher (Bahamas), which closed at end-March 2022, was funded at least in part with financing from FTX.

The bank then doubled down on this position with a November 14, 2022, statement that remains posted to its website. “FTX did not provide any services to or hold any assets for the bank,” it reiterated. “Deltec Bank does not hold or trade any digital assets for its own account or on behalf of its clients. Therefore, there is no credit or asset exposure by the bank to FTX.”

However, the US senator duo asked Mr Powell whether Alameda Research’s investment in Moonstone meant it now ‘controlled’ the bank under US banking laws, and if it had made the necessary application for Federal Reserve approval.

They also questioned the nature of FTX and Alameda Research’s business relationship with both Moonstone and FBH Corp, the entity headed by Mr Chalopin, as well as the source of the $11.5m invested. Further queries were raised over how much of Moonstone’s business was coming from FTX and Alameda Research.

Comments

Sickened says...

Oh boy. Could be some big problemos.

Posted 9 December 2022, 1:42 p.m. Suggest removal

TalRussell says...

I recall being very first have dropped hints in several my posts that raised questions over a certain US Bank's connections to both FTX and a **local bank's** chairman, including my post appeared in newspaper's article, featuring a video of the AG's **30 minutes continuous 'yellin'** spree.**

Clearly AG's **yellin** was intended to quell the tone of the out islanders natives content their questions about **his government's** regulators, **missing scrutiny** FTX Bahamas.

Rest assured, Neither was there slightest stab's of over nor undertones.— Yes?

Posted 9 December 2022, 2:49 p.m. Suggest removal

ohdrap4 says...

The closure of the Punch has left a void.
You nerd to open your owm tabloid.

Posted 10 December 2022, 5:51 a.m. Suggest removal

ThisIsOurs says...

Either we're extremely dumb or someone say *leave them people alone*. Because while the public may not have been aware of all the oddities behind FTX's operations, *someone*s somewhere in some govt agencies had to know. There are just too many *what was that again*s

Posted 9 December 2022, 5:07 p.m. Suggest removal

ThisIsOurs says...

just like the carnival. Apparently everybody but the general public knew they was paying off the ruling party of the day to operate. And when you in a relationship with "only" the ruling party giving them hundreds of thousands of dollars or you cant open, there's only one word for that

Posted 10 December 2022, 12:59 a.m. Suggest removal

ThisIsOurs says...

"*investment was “more than double the bank’s worth at the time”, *

"*The fact that an offshore hedge fund, that was basically a crypto firm, was buying a stake in a tiny bank for multiples of its stated book value should have raised massive red flags for the FDIC.,*"

Said the **exact** same thing about local happenings. **The fact that in Nov 21, FTX, a cryoto firm whose fundamental existence disparages cash, was OPENLY approaching local banks offering a 12% interest rate for CASH should have sent massive shockwaves through the banking industry, the central bank, the SCB and the ministry of Finance. They ALL had to have been aware. We talk juicy news too much**. "Crickets". Even when the story was reported it was reported as **dictation** Up to today, noone has pointed out how odd this was beyond the general, *yeah they ask us for money but we didnt give any*.. These guys were in trouble for at least a year and desperately seeking cash to cover over leveraged positions. This would mean something else... Sam knew... while the leak of the financial statement was done by someone he most likely pissed off, he wasnt surprised by the info, this didnt just happen...

Posted 9 December 2022, 5:17 p.m. Suggest removal

Maximilianotto says...

Yes our most competent minister of finance should have noticed or was he just climbing pyramids ❓🤣

Posted 9 December 2022, 8:32 p.m. Suggest removal

AnObserver says...

Do not forget who was at the helm of Deltec when they pivoted to the crypto space.

Posted 10 December 2022, 9:01 a.m. Suggest removal

TalRussell says...

@AnObserver, we Tribune readers suffer bouts of forgetfulness so, in Christian spirit forgiveness, do remind us, — Yes?

Posted 10 December 2022, 1:10 p.m. Suggest removal

LastManStanding says...

Nothing will happen, everything will be swept under the rug and the masses will forget about this as the next "current thing" is in the headlines.

Posted 10 December 2022, 2:54 p.m. Suggest removal

ThisIsOurs says...

That would be true if our govt could direct the actions of the police and law enforcement everywhere. "Sadly" its beyond their control. You only need to look at Ryan Pinder's too late speech to understand this isnt the same ole same ole.

Posted 11 December 2022, 9:56 a.m. Suggest removal

LastManStanding says...

I briefly thought SBF was a cooked goose until the ties with Ukraine and bigwig politicians in the US became public. Notice how Bahamian media outlets have given this story far more coverage than US ones; the "cabal" isn't going to get rid of one their own.

Posted 11 December 2022, 8:08 p.m. Suggest removal

TalRussell says...

I have no idea but I'll tell you this.

If Sam Bankman-Fried, ends up doing jail time, he won't be without 'his' cellmates.

There's going to be plenty of the world's **determined** financial watchdogs', policemans' and prosecutors' - will be laser focusing inward at some well-known and may not yet be under spotlight, locals.

Hopefully, not all loot has been spent cause goin' take **lots up-front loot to afford 'Lawyer Up.**

There's always option setting up a fundraising page on GoFundMe, takes just a few minutes and some basic computer skills.

Seems some Hurricane Dorian victims **have gained such experience.**

Talkin' about those who collected insurance settlements, forgivable money from the government's hurricane relief programs, or so I've been led to believe, and still **cried hurricane victims** on GoFundMe, — Yes?

Posted 10 December 2022, 11:19 p.m. Suggest removal

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