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The Accusation
A recent lawsuit reported by Bloomberg brings to light accusations against the cryptocurrency trading platform FTX and its sister firm, Alameda Research. The claim suggests that both companies engaged in a secretive operation with Deltec Bank & Trust Ltd. in the Bahamas to create and sell Tether (USDT) stablecoins to turn a profit.
The Alleged Method
According to the lawsuit filed in a Florida court, Caroline Ellison, the former CEO of Alameda Research, detailed how the scheme functioned. The process involved creating USDT on credit via an informal Deltec Line of Credit and subsequently selling the USDT for profit, bypassing the requirement to deposit U.S. dollars into Tether’s Deltec account in a timely fashion.
Bankman-Fried and Deltec’s Role
The lawsuit further alleges that Deltec facilitated the misappropriation of customer funds by allowing transfers between FTX and Alameda Research accounts. This was reportedly under the guidance of the then-FTX CEO Sam Bankman-Fried. Venable LLP, representing Deltec, denies any knowledge of FTX’s malpractices.
The Legal Battle
Victims’ lawyers filed the complaint, backed by evidence including 7,000 pages of Telegram chats provided by Ellison. The lawsuit contends that despite Deltec’s awareness of customer ownership of the funds, they improperly transferred them to Alameda. Deltec also allegedly prioritized Alameda’s withdrawals over other customers during the 2022 cryptocurrency market crash.
Aftermath of FTX’s Bankruptcy
Following FTX’s bankruptcy, the company stated that its collapse did not pose a risk to Tether, claiming that Alameda Research had always covered its token purchases with U.S. dollars. However, the lawsuit challenges this claim, suggesting that Deltec received deposits from FTX customers and engaged in inappropriate transfers to Alameda.
Bankman-Fried’s Current Legal Challenges
Bankman-Fried faces multiple legal challenges, including a $1 billion lawsuit from FTX and lawsuits from Binance, the SEC, and the CFTC. A federal judge recently denied a request to delay his sentencing, which is set for the following month, despite a potential second trial on the horizon.
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