Cryptocurrency trading platform FTX used Bahamas-based lender Deltec Bank & Trust to secretly steal Tether (USDT) stables as part of a commercial scam, according to a new lawsuit reported by Bloomberg. Created and sold coins.
The lawsuit, filed Friday in Florida court, also names FTX's sister company, Alameda Research.
Caroline Ellison, former CEO of Alameda Research, is quoted in documents explaining how the plan worked.
Alameda created Tether (USDT) with credit through an unofficial Deltec credit line.
The company then sold the USDT for a profit under the direction of then-FTX CEO Sam Bankman Fried. He then had to fund the purchase by depositing US dollars into Tether's Deltec account.
The complaint also alleges that Deltec helped Bankman Freed misappropriate customer funds by facilitating transfers between FTX and Alameda Research accounts.
Lawyers for victims of the Bankman Freed case filed a complaint in Florida federal court on Friday, February 16th.
The law firm Venable LLP, which represents Deltec, maintains that the bank is not aware of any wrongdoing on the part of FTX.
Tether, the issuer of USDT, grew as a result of this maneuver, but was not named as a defendant in the lawsuit.
Lawyers for victims of Bankman Freed's fraud teamed up with Bankman Freed's ex-girlfriend, Ellison, to present 7,000 pages of Telegram chats as evidence.
After the collapse of FTX
When FTX went bankrupt, Alameda Research issued a statement asserting that the bankruptcy posed no risk to Tether as it had always paid for its tokens in USD.
But Friday's lawsuit alleges that Deltec took deposits from FTX customers and improperly transferred them to Alameda, knowing those funds belonged to the customers.
Deltec allegedly granted Alameda exemptions from certain regulations and prioritized Alameda's withdrawals over other customers during the 2022 cryptocurrency market crash.
A subsequent investigation into FTX's practices resulted in the conviction of 31-year-old founder Bankman Fried on seven counts of fraud and conspiracy. His sentencing is scheduled for next month.
Sam Bankman Freed's legal woes
Bankman Fried is embroiled in several legal disputes, including a $1 billion lawsuit filed by FTX against him and three other former executives.
FTX also filed a lawsuit against Binance, the world's largest cryptocurrency exchange, alleging breach of contractual obligations and unfair competition.
Additionally, the SEC and CFTC have filed suit against Bankman Freed and Alameda Research alleging fraudulent and manipulative practices in their commodity rate offerings.
In December, a federal judge denied Bankman-Freed's motion to extend his sentence and delay his pre-sentence interview with the U.S. Probation and Pretrial Services System.
The judge denied the motion, even though the lawyers asked for an extension due to the possibility of a second trial on additional charges scheduled for March 11. The judge emphasized that the defense had not raised any objections when the hearing, scheduled for March 28, was originally set.
Additionally, the judge suggested that if the Justice Department chooses a second trial, the sentencing process could be delayed. These legal proceedings will have a significant impact on the crypto industry as regulators seek to establish a clear regulatory framework.
