Given that the banks utilized by both businesses are owned by the same person, the relationship between Tether and the troubled cryptocurrency exchange FTX is still in doubt. Farmington State Bank's parent company FBH, run by Jean Chalopin, received a $11.5 million investment from FTX's Alameda Research. Unexpectedly, Chalopin serves as chairman of the principal bank for Tether, Deltec Bank, which is situated in the Bahamas.
Tether Link Between FTX and Alameda
The bankruptcy of FTX reveals unexpected investments by SBF and raises concerns about its activities, according to a November 23 New York Times article. Through its trading company Alameda Research, FTX invested $11.5 million in the Washington-based parent company of the little Farmington State Bank in March. The bank only has one location, three staff members, and no credit card or online banking services.
Farmington's net worth was $5.7 million and its deposits were close to $10 million, according to the Federal Deposit Insurance Corporation, before the takeover. Deposits rise to $84 million as a result of FTX's agreement with the bank, which was spearheaded by Ramnik Arora, head of product at FTX. The $71 million, according to the FDIC, came from just four new accounts.
Farmington and Deltec chairman Jean Chalopin persuaded authorities to permit FTX to operate in The Bahamas. The primary bank for Tether, the stablecoin's issuer, is Deltec. Since FTX and Alameda were Tether's two biggest trade partners, some people think Tether will be the most negatively impacted by FTX's failure. Paolo Ardoino, the CTO of Tether, refuted any exposure to FTX.
Experts express alarm, meanwhile, about potential connections between the stablecoin and FTX's fraudulent activities. The second-largest user of Tether, Alameda, purchased almost $36 billion worth of the cryptocurrency. Additionally, FTX used USDT for transactional purposes. Tether CTO Ardoino, however, refuted the notion that "Alameda sent USD and got USDT," asserting that it was entirely transactional.
Sam Bankman-Fried's Interactions with Federal Authorities
Banking experts are still perplexed as to how federal regulators let FTX to acquire a stake in a bank with a U.S. banking license. Additionally, the FDIC, state authorities, and the Federal Reserve should have had concerns about a cryptocurrency company purchasing stock in a bank at a price double its book value.
Additionally, SBF has drawn comparisons to SEC Chair Gary Gensler and received criticism for failing to shield investors. In actuality, FTX executives contributed close to $70 million to the midterm elections, going to both the Democrats and the Republicans.