Custodia Bank filed Friday an amended complaint against Federal Reserve, just weeks after it rejected Custodia Bank’s attempt to obtain a master account and become a member.
Wyoming Special Purpose Depository Institution claimed that the denial of their application was illegal. They claimed that the Federal Reserve Board, Biden administration coordinated a series public statements to accompany Custodia’s rejection and that the Federal Reserve Board, not the Kansas City Fed, was “pulling the strings.”
Custodia was denied membership of the Federal Reserve System by the Federal Reserve at the end January. Custodia applied for a master account, but that application was also rejected immediately.
“Defendants had a nondiscretionary obligation to grant Custodia a master account application and not discriminate against Custodia when it comes to its access to all bank services via that account. The filing stated that any other outcome would have a negative impact on the dual-banking system which has been a part of our nation’s history since its inception.
Custodia sued the Fed for the first time last year. She claimed that the Fed had failed to meet a deadline to decide on Custodia’s application for a master accounts.
“Defendants attempted to settle the lawsuit after being faced with discovery requests from the Kansas City Fed and the deadline for the Board, which would have revealed that the Board had control over Kansas City’s Fed decision-making process. In a coordinated move orchestrated by the Board with the White House, and leaked to reporters the day before, the Kansas City Fed reported Custodia’s master account denial immediately after the Board denied Custodia’s membership application.” Friday’s filing stated.
Custodia argues that the Fed cannot reject Custodia’s application. However, the statute states that Fed services “shall not be available to nonmember depositories.”
Custodia spokesperson Nathan Miller stated that Custodia Bank had filed an amended complaint against the Federal Reserve Board of Governors of Kansas City Federal Reserve Bank. This amended complaint focuses on the core legal question of whether Congress granted the Fed the discretion to determine master accounts.
Caitlin Long, Custodia founder, tweeted that she had provided evidence of “probable crime” by a unnamed crypto-company before it collapsed to law enforcement. She also warned regulators about the risks associated with crypto bank runs.