Beautiful views in the Bahamas. Image by Rüdiger Stehn via License: Creative Commons

News from the trial of the bankrupt exchange FTX: According to a statement, FTX’s bank, Deltec, allowed the hedge fund Alameda Research to buy Tether dollars on credit. This is not the first scandal involving the bank in the Bahamas – and the stablecoin USDT.

In the court case surrounding the collapse of FTX and the founder of the bankrupt exchange, Sam Bankmann-Fried, an interesting detail recently came to light, the implications of which may go far beyond FTX:

Deltec, FTX’s bank, apparently gave Alameda Research, Bankman-Fried’s hedge fund, a “secret” loan that allowed it to create Tether (USDT). According to a lawsuit filed in a Florida court, Deltec did not allow Alameda to deposit US dollars until three days later to pay for the USDT he had already withdrawn. This allowed the fund to trade or sell the USDT on the market for a profit before paying for it.

The lawsuit is based on testimony from Caroline Ellison, former CEO of Alameda Research. Ellison said: “We can create USDT on credit by using an unofficial loan with Deltec and selling the USDT for a profit before paying with a deposit of US dollars into Deltec’s Tether account!”

The bank denies the allegations. Her lawyer, Desiree Moore, says the bank and its managers were unaware of any abuse before it became public. The lawyer also said that the accusations come primarily from a person who is currently in court proceedings and may want to buy a reduction in sentence by testifying against Deltec.

Always Deltec…

The lawsuit is explosive because it gives new fuel to a long-standing suspicion: that Deltec is at the center of semi-legal to illegal crypto activities in the Caribbean. The Bahamas-based bank was founded by Jean Chalopin, a French former television producer best known for Inspector Gadget. Deltec is not only the bank of FTX, but also of other crypto companies, including stablecoin issuer Tether.

The bank is repeatedly at the center of scandals and legal proceedings. In the summer of 2023, for example, US authorities confiscated around $58 million from their accounts. They were apparently based on a “pig butchering” scam with 150 victims.

As Protos magazine reports, Chalopin was the link between football billionaire Joe Lewis and Sam Bankman-Fried. Joe had sold Sam $76 million worth of real estate in the Bahamas before he was convicted of insider trading in January.

However, the connections continue. For example, Alameda Research invested $11.5 million in FHB, a Chalopin company. FBH then purchased Farmington State Bank and rebranded it as Moonstone Bank. Shortly afterwards, the bank recorded an extreme increase in deposits of large sums, to which FTX was not entirely uninvolved. The bank was a welcome bridgehead to the USA for the stock exchange.

And what about Tether?

The fact that Deltec was once the main bank of stablecoin issuer Tether and Alameda Research was one of the main buyers of newly created Tether dollars makes the nexus even more suspicious. There is an age-old suspicion here that Tether manipulated the market with uncovered dollar tokens.

However, according to Tether, Deltec’s importance for the stablecoin has largely evaporated. While Deltec managed more than $26 billion for Tether in 2021, it was only $90 million in 2023, which corresponds to just 0.1 percent of all assets held by Tether. If there is a scandal here, Tether will probably have outgrown it long ago.

Life sentence for Sam

And while Deltec and Caroline Ellison are currently fighting in court, Sam Bankman-Fried was found guilty last November. The jury declared the former FTX boss guilty of seven counts, mostly fraud and money laundering or inciting both. Due to the amount of money involved, he faces a maximum sentence of 115 years in prison.

For those who lost money in FTX, however, there is a happy ending: Bankman-Fried has invested large sums in startups. Of these, while most have performed poorly, some, particularly those related to AI, have gained massively in value. The insolvency administrator therefore expects to be able to fully repay the outstanding liabilities of around ten billion dollars.

This means that the FTX exchange is completely solvent again, despite the misappropriation of customer funds and a clear insolvency at the end of 2022. Had there not been some kind of bank run after FTX’s abysmal balance sheet was revealed, perhaps everything would be fine today – for customers and especially for Sam Bankman-Fried. Or not.


Leave a Reply