Cryptocurrency Scandal Unveiled: Alleged Billions in USDT Creation and Misappropriation Rock FTX and Alameda

Cryptocurrency Scandal Unveiled: Alleged Billions in USDT Creation and Misappropriation Rock FTX and Alameda

Crypto News – A recent court case, as reported by Bloomberg on February 17th, suggests that FTX entities may have engaged in the creation and exploitation of Tether (USDT) through a partnership with a banking institution.

Former CEO of Alameda Research, Caroline Ellison, purportedly disclosed a method wherein Alameda could generate USDT on credit via an unofficial line of credit with Deltec Bank. This USDT could then be sold for profit prior to the obligation of funding the purchase with US Dollars in Tether’s Deltec account.

Alameda Research, a sister company of FTX, allegedly facilitated the transfer of funds to its Deltec accounts to finance the creation of billions of dollars in USDT between 2020 and 2021. Notably, Alameda received these USDT tokens days before the actual payment was made, subsequently profiting from their sale.

The arrangement, described by Bloomberg as a short-term line of credit with a ‘three-day grace period,’ was purportedly exclusive and undisclosed to other customers by Deltec.

Furthermore, the lawsuit alleges that Deltec actively contributed to the broader misappropriation of funds between FTX and Alameda, despite having reasons to be suspicious of these transactions. Allegedly, Deltec received customer deposits from FTX and redirected these funds to Alameda. Additionally, during a cryptocurrency market crash, Deltec reportedly favored Alameda by exempting them from certain rules and prioritizing their withdrawals.

Earlier revelations have highlighted connections between FTX and Moonstone Bank (also known as Farmington State Bank), chaired by Jean Chalopin of Deltec. Moonstone received significant amounts from Alameda and a firm associated with FTX’s Ryan Salame. However, Moonstone’s operations ceased in February following regulatory actions by the Federal Reserve in August 2023.

Deltec has vehemently denied any wrongdoing. Representatives assert that neither the bank nor its chairman, Jean Chalopin, had prior knowledge of the alleged misconduct. Desiree Moore, a legal representative for Deltec, emphasized that the new allegations heavily rely on unsubstantiated statements from individuals settling lawsuits in exchange for information.

Although Bloomberg did not specify the case in question, it noted that the allegations were filed in a Florida federal court on February 16th. While a class action suit targeting the FTX-affiliated law firm Sullivan and Cromwell was filed on the same day, it does not seem to encompass the pertinent allegations.

While an earlier lawsuit against Deltec Bank was filed in Florida in February 2023, public records lack updates beyond June 2023. Hence, it remains unclear if this is the same case. Another lawsuit by the same plaintiff, Connor O’Keefe, commenced in Washington in July 2023, with Deltec Bank similarly refuting all allegations.

It’s important to note that these legal battles are distinct from FTX’s ongoing bankruptcy proceedings and the criminal conviction of its former CEO, Sam Bankman-Fried.