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Did FTX Have $11.5M Stake in 3-Employee Bank to Bypass Banking License?

2 mins
Updated by Kyle Baird
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In Brief

  • Reports show that FTX sister company Alameda Research purchased an $11.5 million stake in a small rural bank in the United States.
  • As analyst question how it got rural approval, some wonder if it was a means to bypass the banking license process.
  • FTX previously purchased an Australian company to bypass the financial services license process.
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Reports have emerged that Alameda Research, a sister company to FTX, had an $11.5 million stake in a small U.S. bank. Some wonder if it was intended to bypass the banking license process.

FTX and Alameda Research are facing increased scrutiny as more information about their financial dealings comes to light. Alameda, a sister company to FTX, had an $11.5 million stake in a small rural bank in the U.S. The bank is called the Farmington State Bank (FSB) in Washington State and has only three employees.

The dealing is being scrutinized for multiple reasons. For one, analysts are examining how broadly FTX dipped its fingers into the financial ecosystem. Secondly, and perhaps more importantly, they worry that the exchange could have used the stake to bypass banking license laws.

The FSB is one of the smallest banks in the U.S., and the stake was more than double its net worth. It specialized in agricultural loans to farmers. The New York Times reported that 85% of the $84 million in deposits came from four accounts alone. 

Attention will turn to how FTX managed to get the approval to buy the stake in the bank. The NYT stated that “Banking veterans say it’s hard to believe that regulators would have knowingly allowed FTX to gain control of a U.S. bank.” 

FTX FTT

Workaround tactics nothing new for FTX

In the past, FTX has used workarounds to bypass license processes. It acquired an Australian company that already held a license called IFS Markets. This allowed it to bypass the regular process for obtaining a financial services license.

The Australian Securities and Investments Commission has since suspended the license for the exchange in Australia. About 30,000 Australians are reportedly creditors of the exchange. 

FTX had also tried to obtain a license in crypto-friendly Switzerland, but the Finma regulator rejected the application. The reasons why it was denied were not made public.

Dubai regulator revokes FTX license

FTX is also facing issues in other crypto-friendly regions. Dubai’s Virtual Assets Regulatory Authority (VARA) suspended FTX’s license as the exchange was collapsing. It cited bankruptcy as the primary reason behind the revocation.

Turkish authorities are also investigating former CEO Sam Bankman-Fried for fraud and have reportedly seized his assets. United States authorities are reportedly going after Bankman-Fried as well.

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Rahul Nambiampurath
Rahul Nambiampurath's cryptocurrency journey first began in 2014 when he stumbled upon Satoshi's Bitcoin whitepaper. With a bachelor's degree in Commerce and an MBA in Finance from Sikkim Manipal University, he was among the few that first recognized the sheer untapped potential of decentralized technologies. Since then, he has helped DeFi platforms like Balancer and Sidus Heroes — a web3 metaverse — as well as CEXs like Bitso (Mexico's biggest) and Overbit to reach new heights with his...
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