FTX Secretly Created Tether for Profit with Deltec Bank, Lawsuit Alleges: The Crypto World Reels

Hold on to your hats, crypto enthusiasts! The FTX saga takes another dramatic turn. A new lawsuit has dropped a bombshell, alleging that FTX, in cahoots with Deltec Bank, secretly manufactured and sold Tether (USDT) for their own gain. Sounds like a plot from a financial thriller, right? Let’s dive into the details of this explosive claim that’s sending ripples through the crypto sphere.

The Alleged Secret Tether Factory: FTX, Deltec, and the USDT Connection

According to a Bloomberg report on February 17th, a court case has brought forth startling accusations. Caroline Ellison, the former CEO of Alameda Research (FTX’s sister trading firm), is quoted in the case revealing a clandestine arrangement. Buckle up, because this is where it gets interesting:

• The ‘Unofficial Deltec Line of Credit’: Alameda Research reportedly had a secret, unofficial line of credit with Deltec Bank.
• Creating USDT on Credit: This line of credit allowed Alameda to conjure USDT tokens seemingly out of thin air, essentially creating Tether on credit.
• Profit from Thin Air: Alameda then allegedly sold this freshly minted USDT for a profit before even depositing the actual US dollars to back them in Tether’s Deltec account.

Think about that for a moment. It’s like printing money, but in the crypto world with USDT. The lawsuit suggests that Alameda Research was the engine behind this operation, transferring funds to Deltec accounts to fuel the creation of billions of USDT in 2020 and 2021. These USDT tokens were then reportedly sold off for profit, days before Alameda actually paid for them. Imagine the potential gains from such a system!

See Also: Sullivan & Cromwell (S&C) Targeted In Lawsuit For Alleged FTX Collusion

The ‘Three-Day Grace Period’ and Deltec’s Alleged Favoritism

Bloomberg described this arrangement as a “short-term line of credit” coupled with a “three-day grace period.” This grace period is crucial. It essentially gave Alameda a window to sell the USDT and pocket the profits before needing to actually fund the purchase. The lawsuit further alleges a crucial point: this sweetheart deal wasn’t available to just anyone. It was a secret arrangement, exclusively for Alameda Research, not offered to Deltec’s regular clientele.

But the allegations don’t stop there. The lawsuit paints a picture of Deltec Bank as more than just a passive facilitator. It alleges that Deltec actively aided the broader misappropriation of funds between FTX and Alameda, even when red flags should have been waving furiously. Specifically, the lawsuit claims:

• Routing Customer Deposits: Deltec allegedly received FTX customer deposits and then channeled those funds directly to Alameda Research.
• Breaking the Rules for Alameda: Alameda was allegedly given exemptions from standard banking rules that other customers had to abide by.
• Favored Withdrawals: During crypto market crashes, Alameda reportedly received preferential treatment when it came to withdrawals, suggesting an inside track.

The Moonstone Bank Connection: Another Piece of the Puzzle?

Adding another layer to this complex web is the connection between FTX and Moonstone Bank (formerly Farmington State Bank). This bank was headed by none other than Jean Chalopin, the chairman of Deltec Bank. Intriguingly, Moonstone Bank received a significant influx of funds: $11.5 million from Alameda and a whopping $50 million from a firm linked to Ryan Salame, an FTX associate.

However, Moonstone Bank’s story took a downturn. Following regulatory pressure from the Federal Reserve in August 2023, Moonstone shut its doors in February of this year. This connection between FTX, Deltec’s chairman, and a now-defunct bank raises even more questions about the financial dealings at play.

Deltec Bank’s Strong Denial: ‘Unsubstantiated Statements’

Unsurprisingly, Deltec Bank is vehemently denying any wrongdoing. Representatives speaking to Bloomberg stated that neither the bank nor its chairman, Jean Chalopin, had any knowledge of these alleged illicit activities. Desiree Moore, a lawyer representing Deltec, dismissed the new allegations as relying on “unsubstantiated statements” from individuals who are supposedly settling lawsuits by providing information. Essentially, Deltec is suggesting the claims are coming from unreliable sources seeking to gain leverage in legal settlements.

While Bloomberg didn’t explicitly name the specific case, they mentioned the allegations were filed in a Florida federal court on Friday, February 16th. Interestingly, a class-action lawsuit targeting the law firm Sullivan & Cromwell (also linked to FTX) was indeed filed in Florida on that day, but it’s unclear if it contains these specific allegations against Deltec. An older lawsuit from February 2023 also named Deltec Bank, but public records show no updates beyond June 2023, adding to the mystery of which lawsuit is being referenced.

See Also: London Based Company, Jupiter Asset Management, Withdrawn Its XRP Investment! Here’s Why!

Adding to the confusion, another lawsuit from the same plaintiff, Connor O’Keefe, surfaced in Washington in July 2023, and Deltec denied allegations in that case as well. It remains unclear which specific lawsuit is bringing these new explosive claims to light.

It’s crucial to remember that all these legal battles are separate from the ongoing FTX bankruptcy proceedings and the criminal case that led to the conviction of Sam Bankman-Fried. The FTX saga continues to unfold, revealing layer after layer of complexity and alleged wrongdoing.

What does this mean for the crypto world? These allegations, if proven true, could have significant ramifications. It raises serious questions about the integrity of Tether, the oversight of banks dealing with crypto firms, and the potential for secret deals within the industry. The legal battles are far from over, and the truth behind these allegations is yet to be fully revealed. Stay tuned, crypto enthusiasts, because this story is far from over!

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