Crypto Critics' Corner

, ,

Episode 147 – MONEY TIME: Deltec Bank moved customer funds from FTX to Alameda Research

YUM YUM MONEY TIME: Deltec Bank moved customer funds from FTX to Alameda Research – Crypto Critics' Corner

Bennett and Cas discuss a class action lawsuit against Deltec Bank and Trust in the Bahamas that alleges that it was instrumental in moving customer funds from FTX to Alameda Research. Coverage of the lawsuit the lawsuit Farmington State response Coindesk coverage of Alameda Research insolvency Affidavit in support of MUFG seizure This episode was recorded on March 6th, 2024.

Cas Piancey and Bennett Tomlin discuss a class action lawsuit against Deltec Bank and Trust in the Bahamas that alleges that it was instrumental in moving customer funds from FTX to Alameda Research.

This podcast was recorded on March 6th, 2024.

Where to find the podcast:

Other episodes mentioned in this episode:

Other resources mentioned in this episode:

Subscribe to get each episode delivered to your inbox:

We also have a Discord Server you can join here.

Where to find Crypto Critics’ Corner:

English Transcript:

00:00:05:03 - 00:00:11:06
Cas Piancey
Welcome back, everyone. I am Cas Piancey. I'm joined, as usual, by my partner in crime, Mr. Bennett Tomlin. How are you today?

00:00:11:06 - 00:00:12:15
Bennett Tomlin
I'm doing well. How are you, Cas?

00:00:12:15 - 00:00:22:07
Cas Piancey
I'm doing good. We are talking about something that I'm just kind of shocked we've never discussed at length before. I know it's come up here and there,

00:00:22:07 - 00:00:25:14
Cas Piancey
we're going to talk about Deltec Bank and Trust, which is a,

00:00:25:14 - 00:00:27:19
Cas Piancey
bank out in the

00:00:27:19 - 00:00:29:03
Cas Piancey
Bahamas.

00:00:29:03 - 00:00:35:22
Cas Piancey
and they, they own a lot of companies throughout the Caribbean, and they've existed for a long time.

00:00:35:22 - 00:00:38:02
Cas Piancey
Their history is interesting and

00:00:38:02 - 00:00:49:09
Cas Piancey
it gets into weird conspiracy land, like, rather quickly. And I'm not one to buy into those conspiracies, to be quite honest. But I think even just going back to the more recent history of Deltec

00:00:49:09 - 00:00:52:19
Cas Piancey
and their association with our favorite cryptocurrency in the world,

00:00:52:19 - 00:00:54:05
Cas Piancey
Tether USDT

00:00:54:05 - 00:00:59:17
Cas Piancey
I believe that there's been some level of disassociation more recently.

00:00:59:17 - 00:01:03:10
Cas Piancey
I believe there's other banks that have stepped in to

00:01:03:10 - 00:01:16:21
Cas Piancey
kind of take over the role of the main bank of tether. But I actually think it's it's good for us to start with the actual recent history of Deltec Bank, which is that

00:01:16:21 - 00:01:19:12
Cas Piancey
Jean Chalopin purchased this bank

00:01:19:12 - 00:01:21:16
Cas Piancey
in the 1990s. I believe

00:01:21:16 - 00:01:24:04
Cas Piancey
anyone unfamiliar with Jean Chalopin, he

00:01:24:04 - 00:01:30:19
Cas Piancey
is not a banker at it like he was not a known he is now, but he was not known as like a banker, a finance guy.

00:01:30:19 - 00:01:50:00
Cas Piancey
He was known as the creator of Inspector Gadget. He's a French guy, creator of Inspector Gadget, and had made money via his syndication of Inspector Gadget and other cartoons, and it sold his entertainment business for a significant amount of money.

00:01:50:00 - 00:01:56:08
Cas Piancey
I believe it had IPOed, and then it got purchased by another company and then he bought this bank in the Caribbean.

00:01:56:08 - 00:01:58:23
Cas Piancey
and suddenly became a banker and a finance guy.

00:01:58:23 - 00:02:00:21
Cas Piancey
can we try to dissect

00:02:00:21 - 00:02:05:02
Cas Piancey
what Deltec has been up to since he took charge?

00:02:05:02 - 00:02:18:03
Bennett Tomlin
For most of the time since he took charge, it seemed as though Deltec wasn't doing that much. They were growing somewhat slowly. They had a few billion in terms of total assets and total deposits under their management.

00:02:18:03 - 00:02:34:16
Bennett Tomlin
And that seemed to be mostly true until the summer of 2018, when tether and bitfinex, after having been cut off from many of their other banking partners, ended up establishing a relationship with Jean Chalopin and Deltec Bank and Trust.

00:02:34:18 - 00:03:06:12
Bennett Tomlin
And this relationship was critical for bitfinex and tether in this era. So much so that you see, like Paolo Ardoino briefly serve as a director for Delchain, you see the Fulgur Alpha hedge fund associated with Delchain. Get onboarded onto Bitfinex in this era, and most importantly, in November 1st, 2018, Deltec Bank and Trust published a letter which claimed that the portfolio cash value of Tether's Holdings was greater than the number of tethers in circulation.

00:03:06:14 - 00:03:28:10
Bennett Tomlin
And at the time this was important because there was a lot of doubt about the assets tether had, their quality quantity, their encumbrance. And the day after this letter was published on November 2nd, Bitfinex takes hundreds of millions of dollars out of Tether's account, continuing the incestuous relationship between these two sister firms,

00:03:28:10 - 00:03:37:04
Bennett Tomlin
Deltec continued to serve as Tether's bank of choice for the next several years, aiding and abetting their growth to now $100 billion size.

00:03:37:06 - 00:03:54:06
Bennett Tomlin
And part of the reason Deltec was so useful is because they were willing to also service a variety of other cryptocurrency firms. The most important one that we're going to be talking about today is Alameda Research. San Bankman-fried’s now defunct proprietary trading desk and embezzlement machine.

00:03:54:06 - 00:03:59:07
Bennett Tomlin
Alameda Research banked Deltec and was also Tether's number one client.

00:03:59:07 - 00:04:32:21
Bennett Tomlin
There are some allegations in a recent class action lawsuit filed in the Southern District of Florida, which provides some additional color on the relationship between Alameda Research after Deltec and Tether. But I think we're going to get into. But the most important thing to understand off the jump is starting in the summer of 2018, up until probably like the collapse of Alameda Research, Deltec Bank, interest made itself one of the most important banks in cryptocurrency, and they had dreams of becoming even more important.

00:04:33:03 - 00:04:53:06
Bennett Tomlin
Like we talked about in our Moonstone episode, Jon show up and went out and purchased an American bank as well, which had FTX deposits which Alameda research invested in, which eventually got in trouble for, you know, not telling the Federal Reserve about what they were doing and things like that. We'll get into that as well. Also go back to our last Moonstone episode.

00:04:53:08 - 00:05:09:21
Bennett Tomlin
But in short, Deltec bank interest became the preeminent cryptocurrency bank, the preeminent cryptocurrency insurer. They run their own cryptocurrency business and are fundamentally tied into the operations of so many of these different firms.

00:05:09:21 - 00:05:14:05
Cas Piancey
What I find to be really funny is if you go to Deltec's

00:05:14:05 - 00:05:19:08
Cas Piancey
Twitter account right now, the last tweet, I guess it's a retweet.

00:05:19:09 - 00:05:48:07
Cas Piancey
The last thing that they've tweeted out essentially is from the Nassau Guardian, Nassau being the capital of the Bahamas. So this is one of the newspapers in the Bahamas, and they are reporting in November of 2022 that Deltec Bank and Trust, one of the largest financial institutions in the Bahamas, said in a statement on its website last week that it has no credit or asset exposure to collapsed cryptocurrency exchange.

00:05:48:09 - 00:05:49:12
Cas Piancey
FTX

00:05:49:12 - 00:05:55:03
Cas Piancey
So it's just kind of lovely to be reminded how this bank,

00:05:55:03 - 00:06:12:21
Cas Piancey
just the last thing they even publicly have really done was say that they had nothing to do with FTX, nothing to do with Sam Bankman-fried. And now we're finding out just over a year later that they definitely had a lot to do with them.

00:06:12:21 - 00:06:16:08
Bennett Tomlin
yeah, I think we should talk a little bit about what that relationship looked like.

00:06:16:08 - 00:06:35:06
Bennett Tomlin
our friend Gregory Pepin, the former deputy CEO of Deltec Bank and Trust, was the primary point of contact for FTX and Alameda Research, according to the allegations in this complaint, which are based on thousands of text messages Caroline Ellison shared as part of her settlement to get out of this class action lawsuit.

00:06:35:06 - 00:07:02:09
Bennett Tomlin
There's a lot of allegations in those text messages and in those lawsuits, including that like Deltec at one point get questions from, I think it was Citibank about what the FTX and Alameda research accounts was doing. And Greg Pepin just handed those questions over to Alameda Research. And then like offered to populate invoices for them to explain why certain deposits and withdrawals were coming in and out of the accounts.

00:07:02:11 - 00:07:08:04
Bennett Tomlin
And the other thing to remember is that this was basically an entirely manual process.

00:07:08:04 - 00:07:28:12
Bennett Tomlin
Deltec wanted to be able to offer intra account settlement like signature in Silvergate could, where you could easily move funds between accounts at the same bank really quickly. But instead of developing a technological solution that enabled that, they put Greg in charge of it and had people text Greg when they wanted to move money.

00:07:28:14 - 00:07:56:04
Bennett Tomlin
And so every so often they would need to reconcile these various wires coming into the Alameda research account that were supposed to be attributed to FTX's or funds at FTX's that were, you know, many hundreds of millions of dollars that needed to get moved over to the Alameda research account for totally legitimate reasons. And so when this would happen, our friend Greg Pepin would hop in a telegram chat he had with a bunch of Alameda research and FTX executives and declare that it was Money Time.

00:07:56:06 - 00:08:24:01
Bennett Tomlin
And when it was Money Time, Greg Pepin would ask the executives at Alameda Research and FTX to explain which of these wires that were coming into the same accounts were meant to go to FTX's and which ones were meant to go to Alameda Research. And he would even sometimes joke about how he was going above and beyond to provide this service, saying things like what Silvergate What doesn't work at 10:38 p.m. and postpone their evening movie star review wires and yeah, of course they don't, Greg.

00:08:24:03 - 00:08:57:18
Bennett Tomlin
Of course they don't. Overall, the allegations talk about how Deltec was instrumental in the physical movement of the funds from FTX to Alameda Research and also offered other special privileges to Alameda Research as it pertains to tether that we'll get into. But like just at the most basic, Greg Pepin was hopping into a telegram chat shouting it was Money Time and then helping move customer funds from FTX to Alameda Research.

00:08:57:20 - 00:09:01:02
Bennett Tomlin
Allegedly, of course, Greg allegedly. Don't worry.

00:09:01:02 - 00:09:02:14
Cas Piancey
So I don't usually

00:09:02:14 - 00:09:03:18
Cas Piancey
talk about

00:09:03:18 - 00:09:13:15
Cas Piancey
our tweets with these people because it's kind of like, whatever. But as you said, so I'm reading the Protos article about this, and it says Pepin

00:09:13:15 - 00:09:24:04
Cas Piancey
wanted to vouch for Alameda publicly at one point, stating, There's people coming to me about Alameda insolvency shit, I'm pushing back and say it's B.S. However, it seems to grow a bit.

00:09:24:04 - 00:09:38:15
Cas Piancey
Those FUD, Are you okay If I come out more publicly attacking people on Twitter when I see and divert attention with peop with people paying me. By the way, there's some additions in there from from protests, but I'm just thinking about how

00:09:38:15 - 00:09:46:05
Cas Piancey
i tweeted out about this in November of 2022 and I said has anyone had an opportunity to speak to the lads at Deltec Bank?

00:09:46:11 - 00:09:48:21
Cas Piancey
How are they holding up? And

00:09:48:21 - 00:09:54:09
Cas Piancey
Kyle, buddy of ours, Kyle Screenshotted Greg

00:09:54:09 - 00:09:56:21
Cas Piancey
saying FUD Stages for dummies.

00:09:56:21 - 00:09:58:21
Cas Piancey
some people asked me

00:09:58:21 - 00:10:01:05
Cas Piancey
if they were any worry about FTX.

00:10:01:05 - 00:10:06:02
Cas Piancey
my regular tweets are sufficient to show I have zero concern and that this guy

00:10:06:02 - 00:10:11:02
Cas Piancey
then goes on to say, Why are you pinging me in this thread? I believe FTX was solvent.

00:10:11:02 - 00:10:24:04
Cas Piancey
Like the overwhelming majority of the industry, and I was wrong and I admit I was wrong and didn't shy away from admitting tons of people lost money by depositing funds with them. Me included. Not sure what is funny here or amusing to poke,

00:10:24:04 - 00:10:30:04
Cas Piancey
and I asked him what kind of exposure did Deltec and Delchain have? And he said,

00:10:30:04 - 00:10:35:11
Cas Piancey
That's been answered and that there's been no impact, no exposure from this event.

00:10:35:13 - 00:10:39:15
Cas Piancey
And I think that's just like patently false.

00:10:39:15 - 00:10:41:03
Bennett Tomlin
I also want to talk about

00:10:41:05 - 00:11:07:14
Bennett Tomlin
the reporting from Coindesk. Leading up to all this made it pretty abundantly clear that Alameda Research was insolvent, like taking the balance sheets that Coindesk was reviewing. At that point, Alameda Research was valuing assets at more than the entire market cap for those assets. At that time, there was evidence just in that that Alameda research was insolvent.

00:11:07:18 - 00:11:13:21
Bennett Tomlin
Yet greg, the deputy ceo of a bank with many billions of dollars under their management,

00:11:13:21 - 00:11:16:17
Bennett Tomlin
looked at that and said this is clearly FUD.

00:11:16:17 - 00:11:17:01
Cas Piancey
Yeah.

00:11:17:01 - 00:11:25:07
Bennett Tomlin
Not to say Greg is, you know, not qualified for his job or anything, but, you know, maybe Greg should have read the article before calling it FUD

00:11:25:07 - 00:11:31:00
Cas Piancey
I mean, I just hope he's not doing due diligence for Deltec because if that's the due diligence.

00:11:31:00 - 00:11:46:03
Bennett Tomlin
interrupt you, but speaking of his tweets, in this era when FTX was declaring bankruptcy, my personal favorite from Greg was November 12th when he says, Question for bankruptcy specialist, Is there any precedent of bankruptcy that would involve so many companies?

00:11:46:03 - 00:11:54:11
Bennett Tomlin
And more important, so many creditors spread all over the world as here we are likely dealing with hundreds of thousands, if not millions of FTX users as creditors.

00:11:54:11 - 00:12:01:04
Bennett Tomlin
he he didn't have a good handle on this situation. Well, he was actively defending FTX. Now, I mean, the research

00:12:01:04 - 00:12:11:16
Cas Piancey
Yeah, well, he's certainly disappeared since this lawsuit made some waves. So he gets quiet whenever these situations present themselves,

00:12:11:16 - 00:12:25:01
Bennett Tomlin
well and he's been quiet kind of since the failure of moonshine and like the distancing of the what was it, innovative financial services group or whatever they were supposed to be like the digital banking type of moonshine that he was connected to, and now he's spending most of his time over it.

00:12:25:01 - 00:12:28:08
Bennett Tomlin
What's it, Theravectys, the biotech company or whatever that

00:12:28:08 - 00:12:33:10
Cas Piancey
Yeah. Look, we shouldn't, we don't need, we don't need to get it.

00:12:33:12 - 00:12:39:12
Cas Piancey
Not at all. And but, but I do think that it's it's certainly interesting that it

00:12:39:12 - 00:12:53:21
Cas Piancey
has caused a chilling effect on the normally loud folks over there at Deltec. And and I do think that a lot of these simple back and forths that you mentioned

00:12:53:21 - 00:13:01:12
Cas Piancey
I guess regardless of how the lawsuit turns out, you know, like we do have some evidence here that these guys

00:13:01:12 - 00:13:04:14
Cas Piancey
they were working together in a very,

00:13:04:14 - 00:13:12:00
Cas Piancey
very, very cushy relationship. Right. Especially for bankers and their clients. It's not necessarily

00:13:12:00 - 00:13:15:12
Cas Piancey
how you would expect them to be behaving.

00:13:15:12 - 00:13:17:10
Bennett Tomlin
feels inappropriately intimate.

00:13:17:10 - 00:13:25:13
Cas Piancey
That's right. But maybe we're just not we we don't we're not dealing with billions of dollars. Perhaps that is how billions of dollars are handled in banks.

00:13:25:13 - 00:13:25:21
Cas Piancey
I have no

00:13:25:21 - 00:13:29:03
Bennett Tomlin
I heard bankers don't care about us because we are thousandaires.

00:13:29:03 - 00:13:31:10
Bennett Tomlin
I think we should also talk about the

00:13:31:10 - 00:13:36:19
Bennett Tomlin
allegations about the line of credit as it was related to tether in Alameda Research.

00:13:36:19 - 00:13:44:11
Bennett Tomlin
lawsuit alleges that Alameda Research was able to consistently sell tethers for more than a dollar.

00:13:44:11 - 00:13:50:11
Bennett Tomlin
We've hinted a little bit at this podcast before and what some of those activities likely were

00:13:50:11 - 00:14:04:11
Bennett Tomlin
capital flight and money laundering and things like that. We've talked about Sam Bankman-fried ownership of other trading desks like Genesis Block and HiveEx and how that was important for moving the funds, but also in terms of

00:14:04:11 - 00:14:08:04
Bennett Tomlin
opening up markets where they could reliably sell tethers.

00:14:08:06 - 00:14:23:00
Bennett Tomlin
And so because Deltec recognized that Alameda Research was able to sell these tethers into these markets, they started extending an effective revolving line of credit to Alameda Research, where Alameda Research could

00:14:23:00 - 00:14:38:18
Bennett Tomlin
have deltec basically transfer money they didn't have yet over to tether. They would get the tethers, they would sell the tethers, and then they would return the funds they got from selling the tethers to Deltec would then return them to and everyone's got their money at that point.

00:14:38:18 - 00:14:39:06
Bennett Tomlin
Then

00:14:39:06 - 00:14:54:06
Bennett Tomlin
at some point this line of credit seemed to exceed $2 billion, borrowed was tracked kind of manually seemingly, and this specific arrangement

00:14:54:06 - 00:15:13:02
Bennett Tomlin
likely tied to the Fiat integration agreement that Alameda Research has with iFinex, which occurred at almost exactly the same time, seems to correspond with Alameda Research just ballooning in terms of the total number of tethers they issued and their like importance as this like tether client.

00:15:13:04 - 00:15:22:11
Bennett Tomlin
And so yeah I think that that suggests that Deltec had this very critical role in enabling Alameda research to become this massive tether client.

00:15:22:11 - 00:15:34:10
Cas Piancey
I want to actually like this does touch on something that our last episode about tether getting essentially to $100 billion market cap, whatever we want to call it.

00:15:34:10 - 00:15:48:17
Cas Piancey
But this goes back to this idea of people saying, ha ha, see, there's nothing wrong with tether. I told you so. And being able to point to evidence like hard evidence saying, no, actually, you know what the truth was, was that

00:15:48:17 - 00:16:03:11
Cas Piancey
they were utilizing tethers exactly the way people have been claiming for a long time, which goes back to things like being unable to get an audit because of this, where if you were handing out loans with money that

00:16:03:11 - 00:16:15:16
Cas Piancey
you don't have to buy assets and then quickly arbitrage those assets and make money on it so that you're now backing the funds that you call the loans back into that. Like there is something

00:16:15:16 - 00:16:33:05
Cas Piancey
deeply wrong with that. There's something deeply, deeply wrong with that picture. And that is actually the picture we're seeing painted here. Like it is undeniable that this is the kind of stuff that was happening at least at certain given points in time in Tether's history, in FTX’s history, in Bitfinex’s history,

00:16:33:05 - 00:16:55:00
Bennett Tomlin
And what's particularly interesting to me is how this seems to be almost a formalizing of a preexisting tether arrangement. If we go back to the CFTC settlement between with Tether, they talk about how tether at times was backed by anticipated wire transfers, so Tether would send you the tethers before they actually got the money because they knew you were going to send it on Monday.

00:16:55:00 - 00:17:00:03
Bennett Tomlin
Right. As soon as you could get to the bank, you were going to send that money so they would give you the tethers beforehand.

00:17:00:03 - 00:17:01:20
Cas Piancey
the famous weekend wires.

00:17:01:20 - 00:17:20:13
Bennett Tomlin
Yes, what this is is basically that same thing, except tether is now smart enough to keep themselves from being the entity like that's directly extending the credit. They had deltec effectively stand in as the middleman and extend that same revolving line of credit against the anticipated wire transfers.

00:17:20:15 - 00:17:43:13
Bennett Tomlin
But now tether itself is getting the money from deltec into their account immediately. And so what's interesting to me is that it's that same pattern that they've been doing since, let's say, 2018, 2017, whatever. But now they've added this like bank, this seemingly semi legitimate institution in the middle of these arrangements that have existed for most of Tether's existence,

00:17:43:13 - 00:17:44:02
Cas Piancey
I think

00:17:44:02 - 00:17:45:09
Cas Piancey
there's some unfortunate

00:17:45:09 - 00:18:01:08
Cas Piancey
things that people need to realize and I think you and I realized this probably a lot sooner than other people which is so before tether started banking with Deltec, one of the banking partners, they had I shouldn't even call it a bank because it wasn't a bank. It was what's called an

00:18:01:08 - 00:18:03:04
Cas Piancey
international financial entity.

00:18:03:06 - 00:18:06:07
Cas Piancey
called Noble Bank. That was the name of this IFE,

00:18:06:07 - 00:18:15:13
Cas Piancey
and that was their partner that they were relying on. Apparently, according to Bloomberg reporting, I believe, or maybe it was Zeke Faux in his book.

00:18:15:13 - 00:18:17:12
Cas Piancey
apparently Jon Betts,

00:18:17:12 - 00:18:23:04
Cas Piancey
the the guy who created Noble Bank, decided to shut it down after Giancarlo Devasini

00:18:23:06 - 00:18:29:21
Cas Piancey
He wanted to do riskier things with these assets that were being held in at Noble

00:18:29:21 - 00:18:33:15
Cas Piancey
Giancarlo being the CFO of Tether and Bitfinex.

00:18:33:15 - 00:18:36:16
Cas Piancey
So that's when they made their move to Deltec.

00:18:36:16 - 00:18:42:18
Cas Piancey
But I think that's when we realized, especially after Noble immediately shut down thereafter, that

00:18:42:18 - 00:18:47:01
Cas Piancey
this is like such a bigger problem than one bank.

00:18:47:01 - 00:18:47:09
Cas Piancey
Like

00:18:47:09 - 00:18:54:22
Cas Piancey
even if deltec I this is as far as I can recall, this is a civil case that's being brought against them. And am I right about that? Yeah. So this is

00:18:54:22 - 00:19:01:07
Cas Piancey
class action lawsuit. It's a civil suit. You never know. That could lead to other action. Possibly. But I'm not holding my breath.

00:19:01:07 - 00:19:01:18
Cas Piancey
I see.

00:19:01:18 - 00:19:08:16
Cas Piancey
I see you there. But hold on. Let me just continue here for a second in that I think this is similar to other things where

00:19:08:16 - 00:19:32:13
Cas Piancey
regardless of how this this civil suit turns out, I do think that you have a tarnished reputation a bit for this bank. Unfortunately, you know, Jean Chalopin helped craft the DARE Act in the Bahamas, which helped make it a welcoming place for FTX and SBF, which helped kind of lead it to being the center of where this fraud was being committed.

00:19:32:15 - 00:19:37:13
Cas Piancey
So so I do think that on the island and outside of the island now,

00:19:37:13 - 00:19:46:23
Cas Piancey
you know, this is in my opinion, but it seems like you have a bit of a tarnished reputation for this bank. And Tether had long ago already moved on

00:19:46:23 - 00:19:47:16
Cas Piancey
to

00:19:47:16 - 00:19:48:12
Cas Piancey
CUB

00:19:48:12 - 00:19:49:16
Cas Piancey
Capital Union Bank.

00:19:49:16 - 00:19:53:09
Bennett Tomlin
and Ansbacher and etc. etc. down the

00:19:53:09 - 00:19:56:02
Cas Piancey
and who knows who even knows what what they are.

00:19:56:04 - 00:19:56:08
Cas Piancey
Yeah,

00:19:56:08 - 00:19:59:11
Cas Piancey
there's probably new ones that they're trying to work with every single day.

00:19:59:11 - 00:20:03:22
Cas Piancey
But that in turn is part of the issue, right? Is that there's

00:20:03:22 - 00:20:15:11
Cas Piancey
likely, I don't know, thousands of these banks, not just in the Caribbean, we're talking about in Eastern Europe, in Asia, in I I'm sure in America, community banks, stuff like that.

00:20:15:11 - 00:20:24:21
Cas Piancey
there and bigger banks too. I'm not going to deny that or HSBC the likes of them you have banks and

00:20:24:21 - 00:20:29:04
Cas Piancey
money movers who are more than willing to work with these people, regardless of

00:20:29:04 - 00:20:39:09
Cas Piancey
how weird and possibly illegal the transactions may be that are, that are occurring. you know, I'm not a lawyer. I'm not going to call what

00:20:39:09 - 00:20:42:04
Cas Piancey
Deltec was doing for FTX's and

00:20:42:04 - 00:20:42:21
Cas Piancey
tether,

00:20:42:21 - 00:20:43:21
Cas Piancey
illegal.

00:20:43:23 - 00:20:45:19
Cas Piancey
But it sure stinks

00:20:45:19 - 00:21:02:14
Bennett Tomlin
speaking of weird and possibly illegal transactions, the lawsuit mentioned that Alameda's transactions with Bitfinex and Tether would first flow through Deltec Bank's account and Mitsubishi UFJ Trust and Banking Corporation, A Japanese bank.

00:21:02:16 - 00:21:30:22
Bennett Tomlin
And the lawsuit also mentioned that U.S. authorities seized funds from there in June, which sent me down a bit of a rabbit hole until I discovered a June affidavit which supported the seizure of Deltec bank funds held at Mitsubishi, Mitsubishi UFJ Trust and Banking Corporation related to an investigation into wire fraud, bank fraud and money laundering. And what makes this really interesting is that it seems Deltec opened what was supposed to be a custodial account at Mufg,

00:21:30:22 - 00:21:44:21
Bennett Tomlin
but the affidavit suggested Deltec has allowed the account to be used by other third parties in activity that would not reasonably be anticipated in the custody account, and that has allowed individuals to avoid the scrutiny and vetting

00:21:44:21 - 00:21:48:01
Bennett Tomlin
that international transactions might otherwise receive.

00:21:48:01 - 00:21:55:19
Bennett Tomlin
This affidavit in specific does not mention FTX does not mention Alameda Research. Does not mention Tether,

00:21:55:19 - 00:21:57:12
Bennett Tomlin
does mention

00:21:57:12 - 00:22:11:05
Bennett Tomlin
proceeds from cryptocurrency investment scams, but seems to be a separate money laundering network that is not principally Bitfinex Tether, Alameda Research or FTX. Just to make that explicitly clear. But what this reveals

00:22:11:05 - 00:22:26:18
Bennett Tomlin
is that Deltec is, according to this affidavit, kind of doing a crypto Capital Corp where they are opening accounts in one name for one stated purpose and using them for other purposes without telling banks.

00:22:26:20 - 00:22:51:14
Bennett Tomlin
And my understanding, again, as a non-lawyer and especially as a non prosecutor, is that banks don't like it when other banks lie to them. They take that quite poorly. And so if there is going to be other consequences for Deltec, I think it is unlikely they arise from this class action lawsuit. I think that this likely results in may be some money deltec has to give these people, but probably nothing.

00:22:51:20 - 00:23:20:05
Bennett Tomlin
The more interesting thing to me is that there was this earlier seizure in March through this account that seems to line up with the same type of account that Bitfinex and Tether's funds were flowing from to FTX and Alameda Research. That is the interesting thing to me, and that suggests there may may be ongoing criminal or other investigations into activities either by deltec or by entities that were taking advantage of deltec practices.

00:23:20:05 - 00:23:35:22
Cas Piancey
you mentioned Mitsubishi UFCW, and I know that that's one of the largest banks in the world. So this is, I'm sure, not surprising, but I believe that they were also a bank that was utilized by FTX's Alameda, Right?

00:23:35:22 - 00:23:36:16
Bennett Tomlin
Yes.

00:23:36:16 - 00:23:39:04
Cas Piancey
guess there's always been talk of the

00:23:39:04 - 00:23:40:21
Bennett Tomlin
The Japan arbitrage. Yes.

00:23:40:21 - 00:23:47:20
Cas Piancey
well there's always rumors they were different ones right now one it doesn't seem like anyone has ever nailed down exactly what was going on

00:23:47:20 - 00:23:52:18
Cas Piancey
or how it was happening. But yeah if if it was indeed the Japan arbitrage and

00:23:52:18 - 00:23:54:20
Cas Piancey
he was actually making money at first,

00:23:54:20 - 00:23:55:20
Cas Piancey
then perhaps.

00:23:55:20 - 00:23:56:20
Cas Piancey
Yeah, who knows?

00:23:56:20 - 00:24:00:22
Cas Piancey
sure is interesting that they did have bank accounts with MF, MF J

00:24:00:22 - 00:24:06:16
Cas Piancey
yeah, that's just interesting. I mean I, I don't know what it means, but it's very interesting.

00:24:06:16 - 00:24:19:05
Bennett Tomlin
We should also mention besides that, that's the bigger thing. Just for the sake of completion, I want to mention that Farmington State Bank, Moonstone Bank did file their response and their base. Their response was basically

00:24:19:05 - 00:24:28:10
Bennett Tomlin
plaintiffs tried to say, We're deltec, we're not deltec. Those techs are about deltec. We're a whole separate bank that just happens to be owned by the same people.

00:24:28:12 - 00:24:42:07
Bennett Tomlin
And the executives just happened to be the son of the executives of the other bank. But we're a distinct thing and we didn't get to do any transfers of FTX or Alameda Research money because we ran out of time. And so we don't want to be in the lawsuit anymore.

00:24:42:07 - 00:24:47:00
Bennett Tomlin
Again. Non-lawyer But I'll link the thing in the description and you all can read that.

00:24:47:00 - 00:24:48:09
Bennett Tomlin
That's basically what it says

00:24:48:09 - 00:25:02:00
Cas Piancey
I guess the most compelling argument there is that, yeah, if you mess with other banks, the other banks might punish you, which is ultimately or something like FINRA or something like that, where ultimately

00:25:02:00 - 00:25:11:01
Cas Piancey
that's far worse than like a penalty or something or a civil suit being settled like,

00:25:11:01 - 00:25:14:06
Cas Piancey
far worse to have banks say, You know what?

00:25:14:06 - 00:25:25:09
Cas Piancey
We're never going to work with you ever again. Not that that's what's going to happen. We have no idea what's going to happen or what is happening. I mean, obviously Deltec is still in business. They're still doing their thing.

00:25:25:09 - 00:25:26:07
Cas Piancey
I assume that

00:25:26:07 - 00:25:29:02
Cas Piancey
that. They still work with with tether. But who knows,

00:25:29:02 - 00:25:29:20
Bennett Tomlin
far as we know.

00:25:29:20 - 00:25:30:09
Cas Piancey
Anyway,

00:25:30:09 - 00:25:33:13
Cas Piancey
we just felt like it was important for us to talk about Deltec because,

00:25:33:13 - 00:25:38:09
Cas Piancey
it has it for a long time was one of the main banks of tether

00:25:38:09 - 00:25:41:22
Cas Piancey
for cryptocurrency in general. I guess more importantly,

00:25:41:22 - 00:25:50:05
Cas Piancey
it's funny because like a lot of the banks that tether chooses end up being very important to the cryptocurrency industry in general.

00:25:50:05 - 00:25:59:18
Cas Piancey
I don't think they're necessarily they're bank of choice anymore, but certainly was for a long time. And maybe we'll start talking about other

00:25:59:18 - 00:26:02:16
Cas Piancey
other important banks in the cryptocurrency

00:26:02:16 - 00:26:04:07
Cas Piancey
industry. I know

00:26:04:07 - 00:26:12:03
Cas Piancey
a lot of them are gone now. but maybe we can look internationally and talk about those ones instead.
←
→

3 responses to “Episode 147 – MONEY TIME: Deltec Bank moved customer funds from FTX to Alameda Research”

Leave a comment