Deltec Bank Lawsuit Exposes Bankman-Fried’s Secret Line Of Credit Fraud Scheme

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Deltec Bank Lawsuit Exposes Bankman-Fried's Secret Line Of Credit Fraud Scheme

A lawsuit filed in a Florida federal court on Friday exposed Deltec Bank & Trust Ltd, a Bahamas-based bank, in the fraud scheme orchestrated by Sam Bankman-Fried, the former crypto billionaire and founder of FTX exchange, according to Bloomberg. The lawsuit, brought by lawyers representing the victims of Bankman-Fried’s fraud, alleges that Deltec Bank provided him with a secret short-term line of credit to inflate the supply and demand of Tether.

According to the lawsuit, Bankman-Fried’s hedge fund, Alameda Research, allegedly transferred cash from its Deltec account to Tether’s account to generate new tokens and then sell them in the market before using the proceeds. This enabled him to control the price of the Tether and other cryptocurrencies depending on it as a reserve currency.

Furthermore, it is alleged in the lawsuit that Deltec Bank enabled the conversion of customer funds by Bankman-Fried through inter-account transfers between FTX and Alameda without checks or balances. The lawsuit contends that Deltec Bank had good reason to believe the transfer was suspicious because it was often for large sums, was frequent, and was inconsistent with the purpose described.

Deltec Bank Denies Any Wrongdoing; Tether Remains Silent

Deltec Bank, whose CEO Jean Chalopin is the founder of the Inspector Gadget cartoon, denies any information or connection with Bankman-Fried’s wrongdoings. Desiree Moore from Venable LLP in Chicago said that Deltec bank became aware of FTX’s scam only after it was made public. The latest claims are premised on hearsay evidence by claimants settling their cases.

The new allegations rely heavily on unsubstantiated statements by individuals who we understand are settling their lawsuits with plaintiffs in exchange for providing the information, said Moore.

Since its inception, Tether, Co-Founded by an old child actor named Brock Pierce, has faced criticism for claiming to maintain sufficient reserves to support its tokens. In December, it reported $97 billion in assets against $91.6 billion in liabilities without giving details of what it held or proving its current financial status. Recently, Howard Lutnick, head of Cantor Fitzgerald LP, said that his investment bank holds most of Tether’s assets, which are real.

Bankman-Fried Convicted Of Fraud, Faces Prison Sentence

Bankman-Fried, one of the former wealthiest people in cryptocurrency, was found guilty of fraudulence and money laundering convictions related to market manipulation in November 2022, following a long inquiry carried out by US authorities. Using his FTX exchange, Alameda hedge fund, and personal influence in cryptocurrencies, he admitted to a large scandal that cheated thousands of investors on cryptocurrencies’ values.

The Deltec Bank lawsuit, which also involves other alleged enablers, is still ongoing to compensate plaintiffs claiming to have lost millions of dollars due to Fraud perpetrated by Bankman-Fried. The plaintiff’s lawyers said they had acquired new evidence from Caroline Ellison, an ex-girlfriend and former colleague of bankman -Fried.

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