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Cryptocurrency Trading Platform FTX and Alameda Research Accused of Fraud in Lawsuit

A recent lawsuit reported by Bloomberg alleges that FTX, a cryptocurrency trading platform, and its sister firm, Alameda Research, were involved in a profit-making scam by creating and selling Tether (USDT) stablecoins through a Bahamas-based lender, Deltec Bank & Trust Ltd.

This accusation implicates Caroline Ellison, the former CEO of Alameda Research, who provided details on how the scheme operated. The lawsuit claims that Alameda created USDT on credit using the unofficial Deltec Line of Credit and sold it for profit before depositing U.S. dollars in TetherÔÇÖs Deltec account.

The lawsuit also accuses Deltec of aiding then-FTX CEO Sam Bankman-Fried in misappropriating customer funds by facilitating transfers between accounts for FTX and Alameda Research.

The complaint was filed on Friday, Feb. 16, in a Florida federal court by lawyers representing victims of the fraudulent activities. Venable LLP, the law firm representing Deltec, maintains that the bank was not aware of any wrongdoing on FTXÔÇÖs part. Tether, the issuer of USDT, was not named as a defendant in this case despite growing as a result of the alleged ploy.

Furthermore, a significant amount of evidence was turned over by Caroline Ellison, including 7,000 pages of Telegram chats. This evidence has been used to substantiate the claims made in the lawsuit.

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After FTXÔÇÖs Collapse: Allegations Against Tether and Deltec

Following FTXÔÇÖs collapse, the company released a statement asserting that there was no risk to Tether, as Alameda Research always paid for its tokens with U.S. dollars. However, the lawsuit alleges that Deltec received deposits from FTXÔÇÖs customers and unlawfully transferred them to Alameda, despite being aware that these funds belonged to customers.

Deltec is also accused of granting exemptions to Alameda from certain regulations and prioritizing AlamedaÔÇÖs withdrawals over those of other customers during the cryptocurrency market crash in 2022.

An investigation into FTXÔÇÖs practices led to the conviction of founder Sam Bankman-Fried on multiple counts of fraud and conspiracy. His sentencing is scheduled for the near future.

legal Woes for Sam Bankman-Fried

Sam Bankman-Fried faces a myriad of legal disputes, including a $1 billion lawsuit filed by FTX against him and other former executives. FTX has also initiated lawsuits against Binance, alleging breaches of contractual obligations and unfair competition.

Furthermore, regulatory authorities such as the SEC and CFTC have filed lawsuits against Bankman-Fried and Alameda Research, accusing them of fraudulent and manipulative practices in commodity interest offerings.

legal proceedings involving Bankman-Fried have faced delays and complications, with potential implications for the cryptocurrency industry due to the ongoing efforts of regulatory authorities to establish clear frameworks.

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