FTX Crypto Trading Platform Accused of Running Profit-Making Scam with Bahamas Bank: Lawsuit Reveals Secrets

MIAMI, FL – FTX, a cryptocurrency trading platform, is at the center of a scandal involving the creation and sale of Tether stablecoins in a profit-making scheme. According to a recent lawsuit reported by Bloomberg, FTX allegedly worked secretly with Deltec Bank & Trust Ltd., based in the Bahamas, to carry out this fraudulent activity. The lawsuit, filed in a Florida court, also implicates Alameda Research, FTX’s sister firm.

Caroline Ellison, former CEO of Alameda Research, provided details of the scheme in the court filing. The process involved Alameda creating Tether, also known as USDT, through an unofficial line of credit from Deltec. FTX CEO at the time, Sam Bankman-Fried, then sold the USDT for a substantial profit before having to deposit U.S. dollars in Tether’s Deltec account to complete the transaction.

In addition to the creation and sale of Tether, the lawsuit accuses Deltec of aiding Bankman-Fried in misappropriating customer funds by facilitating transfers between FTX and Alameda Research. The complaint, submitted by lawyers representing victims of Bankman-Fried’s alleged fraud, was filed in a federal court in Florida on February 16.

Venable LLP, the law firm representing Deltec, maintains that the bank had no knowledge of any wrongdoing by FTX. However, victims’ lawyers worked closely with Caroline Ellison, Bankman-Fried’s ex-partner, who provided 7,000 pages of Telegram chats as evidence.

FTX’s bankruptcy raised concerns about the potential impact on Tether, but the company released a statement asserting that there was no risk to the stablecoin. However, the lawsuit filed on Friday disputes this claim, alleging that Deltec received customer deposits from FTX and improperly transferred them to Alameda Research, despite knowing they belonged to customers. The lawsuit also accuses Deltec of granting exemptions to Alameda from certain regulations and prioritizing their withdrawals during the cryptocurrency market crash in 2022.

Sam Bankman-Fried, the founder of FTX, is currently facing multiple legal battles. FTX has filed a $1 billion lawsuit against Bankman-Fried and three other former executives. The company has also initiated lawsuits against Binance, the largest cryptocurrency exchange, for alleged breaches of contractual obligations and unfair competition.

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have also filed lawsuits against Bankman-Fried and Alameda Research, accusing them of fraudulent and manipulative practices. Bankman-Fried’s sentencing for the charges of fraud and conspiracy is scheduled for next month.

These legal proceedings have significant implications for the cryptocurrency industry. Regulatory authorities are seeking to establish clear frameworks and standards as they navigate the complexities of digital currencies.