Firm Files Amended Complaint Against Bahamas-Based Deltec Bank for its Role in Aiding and Abetting Sam Bankman-Fried’s FTX Fraud

On February 16, 2024, Fishman Haygood attorneys C. Hogan Paschal and Molly Wells filed an amended complaint related to the FTX Cryptocurrency Exchange Collapse Litigation (Case No. 1:23-md-03076), shedding additional light on the relationship between Sam Bankman-Fried, Bahamas-based Deltec Bank & Trust Ltd., and Tether Limited, which mints the stablecoin UDST. Read more coverage on Bloomberg.

The amended complaint is largely based on 7,000 never-before-seen pages of encrypted Telegram Messenger chats between representatives of Alameda Research, Deltec, and Tether. The new evidence was produced by Caroline Ellison, Bankman-Fried’s ex-girlfriend and former CEO of Alameda, the hedge fund through which the disgraced FTX owner orchestrated much of his fraud. Ms. Ellison and other FTX insiders have settled with and are cooperating with the Plaintiffs in pursuit of their claims against Deltec and additional defendants in the FTX MDL.

In February 2023, Fishman Haygood filed the most comprehensive class action lawsuit on behalf of FTX customers against the banks, venture capital firms, accounting firms, and law firm that allegedly aided and abetted Bankman-Fried and his company in a scheme to defraud customers out of billions of dollars and crypto assets. As suits from across the country mounted against Bankman-Fried and FTX, the cases were transferred to an MDL (multidistrict litigation) in the Southern District of Florida last summer. Many of the MDL master complaints are based on the initial Fishman Haygood complaint.

As the MDL court sorted through these civil proceedings, Bankman-Fried was convicted last November on seven charges of fraud and conspiracy after a weeks-long criminal trial. Despite his conviction, however, questions remained surrounding the lengths to which companies affiliated with him and with FTX helped perpetrate the fraud.

The newly uncovered Telegram and text messages, according to Fishman Haygood’s amended complaint, answer many of the questions related to Bankman-Fried’s involvement with Deltec, including insight into Alameda’s ability to fund nearly $40 billion in Tether purchases, and expose Alameda’s ties to Tether through Deltec.

“Deltec extended to Alameda, and only to Alameda, a clandestine line of credit worth billions of dollars that the company then used to manipulate the crypto-commodities market through inordinately large, and highly frequent, purchases of USDT,” says Paschal. “Alameda funded those purchases with FTX customer deposits, by way of wires and internal transfers that Deltec manually processed.”

According to the suit, Alameda opened accounts at Deltec in order to access Tether more easily. Alameda, the complaint alleges, would then transfer money from its Deltec account into Tether’s account at the bank, creating tokens. During the crypto boom of 2020-2021, the hedge fund helped create billions of dollars in Tether tokens that were then sold in the FTX exchange at a profit before being repaid to Tether’s Deltec account by Alameda.

The Telegram messages show that Deltec assisted FTX and Alameda in other ways. The complaint alleges that Deltec accepted deposits from FTX customers, and—despite knowing that they were customer funds—sent them to Alameda. In return, an entity controlled by FTX executive Ryan Salame provided Deltec’s parent company with a loan of $50 million when the bank proved unable to raise loan capital elsewhere.

Fishman Haygood has taken a lead role in prosecuting FTX investor claims. Partners Jim Swanson and Kerry Miller were appointed to leadership positions in the MDL, serving as a member of the Plaintiffs’ Steering Committee and chair of the Insurance Coverage Committee, respectively.

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