Dori: FTX crypto scandal hits Washington bank, politicians

As twists to the FTX and Alameda Research cryptocurrency scandal continue emerging, a rural Washington bank and at least one local lawmaker – Sen. Patty Murray (D) – have been tied to the FTX founder behind the multi-billion-dollar case, according to several reports.

In what many insiders believe will become the largest corporate scandal in world history, tiny Farmington State Bank south of Spokane has been connected to the case, according to Lynn Brewer, a business ethics author, founder of The Integrity Institute and former Enron whistleblower.

Brewer also told Monday’s Dori Monson Show listeners that FTX founder, Sam Bankman-Fried, his mother, and brother, are behind large and questionable Political Action Committee donations to Democratic candidates – including Murray, among other members of U.S. Congress.

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How did Farmington State Bank, with just $5.7 million in typical assets, get pulled into this? Dori asked.

Of 4,800 banks in the country, with just three employees and no online services, Farmington State Bank was 4,774th in size early this year, Dori told listeners. Its $10 million in deposits remained static for nearly a decade. And yet, after it was purchased by FBH in 2020, Farmington ballooned 600% in net assets in the third quarter of this year with $71 million in new deposits to four new accounts. Each, according to a weekend report in The New York Times, was connected to cryptocurrency investments.

Now operating under “Moonstate Bank,” Farmington was used for its small size to launder money, Brewer said.

“They bought the cheapest bank they could possibly buy and get it approved because it wasn’t federal, it was state — in essence to take over the bank and begin to use it to move cryptocurrency through it,” Brewer said.

The result: the bank was laundering money for Alameda Research, a subsidiary of FTX.

Unlike Bitcoin, “Crypto is the Wild West” with no regulations on truth in advertising, Brewer added.

More from Dori: Is your cryptocurrency part of the new FTX scandal?

So “we have two things at play here,” Dori clarified. The first: breakdowns in “financial regulations that are usually very stringent – but also the political play” for the Democratic party and its candidates.

Meanwhile, Brewer explained, Bankman-Fried – who is allegedly living in a mansion in The Bahamas – has likely lost his $26 billion net worth to bankruptcy.

Before his crypto scheme unraveled, however, Bankman-Fried made millions of dollars in political donations, according to records at OpenSecrets.org. These include $34,000 to Sen. Murray’s campaign – more than 10 times the legal $2,900 limit for contributions of these kinds.

Those donations were above and beyond the $12,600 donation made by Sam Bankman-Fried’s brother, Gabriel Bankman-Fried, through his Guarding Against Pandemics PAC. His mother’s PAC was also making large donations, according to Open Secrets.

During a podcast interview in May 2022, Bankman-Fried told Puskin Industries that he planned to donate “north of $100 million” in the next presidential election and had a “soft ceiling” of $1 billion.

Bankman-Fried’s father, meanwhile, is also involved in the case, Brewer added. A Stanford Law School professor, he was a key adviser for Sen. Elizabeth Warren (D-Mass) in her role developing policies around cryptocurrency.

Sam Bankman-Fried started FTX in 2019 to prop up Alameda Research, a company started in 2017. The companies – operating out of The Bahamas – would buy Bitcoin and other cryptocurrencies at a lower price in one part of the world and sell them at higher prices elsewhere, leaving Bankman-Fried’s team to keep the profits.

Eventually, their plans collapsed.

Back in Washington state, when it comes to little Farmington State Bank, Dori wondered, how come nothing popped on the radar for Washington state regulators?

“I don’t know,” Brewer said. “Everything happened very quickly … In some ways, it feels like Enron. In some ways, it’s much worse.”

Listen to Dori Monson weekday afternoons from noon – 3 p.m. on KIRO Newsradio, 97.3 FM. Subscribe to the podcast here.