Deltec Bank & Trust, based in the Bahamas, is now involved in legal challenges over allegations that it played a crucial role in facilitating advantageous transactions for FTX and its affiliate, Alameda Research, with the cryptocurrency Tether (USDT).
Reports suggest that Alameda Research, founded by Sam Bankman-Fried, used a secret credit line provided by Deltec to fuel the growth of Tether, creating a significant advantage during the cryptocurrency boom of 2020 and 2021.
This lawsuit alleges that starting in 2018, Bankman-Fried opened Deltec accounts specifically to facilitate easy access to Tether, subsequently enabling the minting of billions in USDT. This setup purportedly allowed Alameda Research to profit from arbitrage opportunities by utilizing USDT obtained on credit and later settling the transactions with US dollars.
Further claims against Deltec suggest that the bank was complicit in a broader scheme of misappropriating FTX customer funds. It is alleged that Deltec managed deposits from FTX clients, redirecting them to Alameda Research and providing preferential treatment in regulatory exemptions and withdrawal prioritizations during the cryptocurrency market’s downturn.
While Deltec and its chairman, Jean Chalopin, have denied any misconduct, the lawsuit does not list Tether as a defendant. Tether has stated that transactions with Alameda Research were completed with proper US dollar payments.
FTX Creditors Challenge Legal Firm Sullivan and Cromwell
Adding to the complexity of FTX’s legal problems, the company’s creditors have launched a lawsuit against the law firm Sullivan and Cromwell, LLP (S&C), accusing it of being complicit in the misdeeds leading to FTX’s collapse. The law firm, now managing FTX’s bankruptcy process, is alleged to have played a significant role in the crypto exchange’s fraudulent activities, including multi-billion-dollar schemes that supposedly benefited the firm with fees amounting to $8.5 million.
The lawsuit details S&C’s extensive involvement with FTX, covering regulatory issues, mergers, acquisitions, and bankruptcy proceedings, among other legal services. Ryne Miller, a former S&C partner and later general counsel for FTX, is accused of steering business from FTX to S&C, further intertwining the entities’ operations.
FTX’s creditors are now seeking damages for the alleged civil conspiracy, fraud, and aiding in breaches of fiduciary duty, highlighting the intricate legal and financial entanglements following the crypto exchange’s downfall.