Deltec to ‘vigorously’ fight new FTX lawsuit


Tribune Business Editor


A Bahamian bank and its chairman yesterday denied fresh allegations that they knowingly aided and abetted the multi-billion dollar FTX fraud prior to the crypto exchange’s November 2022 implosion.

Deltec Bank & Trust asserted that neither itself nor its chairman, Jean Chalopin, had any knowledge of wrongdoing by Sam Bankman-Fried and his inner FTX circle as they pledged to “vigorously defend... the unfounded allegations” in the latest class action lawsuit filed against them by the crypto exchange’s aggrieved investors and clients.

“Deltec Bank and Jean Chalopin had no knowledge of wrongdoing by FTX or its executives until the numerous public revelations in late 2022,” the Bahamian institution said in a statement responding to Tribune Business inquiries. “Deltec Bank and Jean plan to continue to vigorously defend against the unfounded allegations in the complaint and look forward to their forthcoming motions to dismiss this case.”

Deltec and Mr Chalopin have been named as defendants in an action filed last Wednesday in the eastern Washington state federal court by Connor O’Keefe, a former FTX client representing the ‘class action’ group. Mr O’Keefe, who lent his name to another FTX class action lawsuit that also named Deltec and Mr Chalopin as defendants, that one in the southern Florida federal court, has gone to eastern Washington likely because that is where Moonstone Bank is located.

This institution, one of the smallest banks in the US, was acquired by Mr Chalopin in his personal capacity. Some $50m, deposited in the name of Bahamas-based FTX Digital Markets, was seized from Moonstone accounts by the US Justice Department.

“Though FTX customers could not see that Sam Bankman-Fried was misappropriating their deposits on vice, vanity and speculative personal investments, defendants had full view,” the lawsuit alleged of Deltec and Mr Chalopin.

“Through diligence on FTX and close ties with Sam Bankman-Fried, defendants learned that FTX was operated as Sam Bankman-Fried’s personal piggy bank; that as quickly as FTX customer funds flowed into FTX, they flowed back out to other entities Sam Bankman-Fried separately owned or controlled, and that FTX lacked the most basic internal controls, such that the enterprise was in fact a house of cards.

“But defendants did not care. They, too, had money to make in the scheme, and their interests aligned with Sam Bankman-Fried’s... Defendants provided a suite of non-routine, high-risk banking services to FTX when traditional financial institutions would not, including accepting and/or transferring class members funds into accounts that defendants knew were held by entities that Sam Bankman-Fried separately owned; developing proprietary blockchain software and other infrastructure necessary to Sam Bankman-Fried’s looting of class members funds, and helping to fence class member funds across the US border.”

Mr O’Keefe and his fellow plaintiffs alleged that Deltec “provided one-of-a-kind digital asset banking services to FTX and, upon information and belief, served as a primary vehicle through which Sam Bankman-Fried routed class member funds offshore beyond the reach of US regulators and law enforcement”.

“By way of his close ties with Sam Bankman-Fried, Mr Chalopin sought funding from FTX for his other bank, defendant Moonstone. Janvier Chalopin, Moonstone’s chief digital officer and Mr Chalopin’s son, reports that they ‘pitched [Alameda Research] the whole road map’ to invest in Moonstone, which he claimed would fill ‘the massive gap in banking in the US for digital assets businesses’,” the lawsuit alleged.

“The Chalopins succeeded. In January 2022, Alameda invested $11.5m in Moonstone—nearly double the bank’s net worth at the time. Moonstone was not always flush with such large inflows of capital. Until recently, Moonstone was the 26th smallest of 4,800 banks in the US with a single branch in Farmington, Washington, a town of only 150 residents.

“In 2010, the bank’s president bragged that it did not offer credit cards and held more deposits than loans outstanding. That changed in 2020, when Mr Chalopin purchased Moonstone, purportedly to support the ‘underserved cannabis industry’, and now serves as its chairman and chief executive.”

The lawsuit added: “Upon Alameda’s investment in Moonstone, Moonstone promptly applied, and was approved, to become a member of the Federal Reserve. With that, FTX gained access to a third point of entry to the US banking system, and FTX promptly took advantage of these services, depositing $50m in class member funds across two accounts.

“At the time of the fraud’s collapse, FTX was Moonstone’s largest customer, and Moonstone, for its part, benefited tremendously from this quid pro quo. With FTX’s accounts, Moonstone’s deposits jumped to $71m in the third quarter of 2020, a 600 percent increase from Moonstone’s historical average. In pursuit of continued growth and unprecedented profits, Moonstone, at the direction of Mr Chalopin, gladly took action in furtherance of Sam Bankman-Fried’s fraud.”


ThisIsOurs 11 months, 2 weeks ago

Hmmm... it's hard to believe that Deltec had no statistical reporting of the large movements on this account, did not have any flags that the source of the funds was customer deposits and the destination was outside the country. That's 3 levels of failure for an established financial institution. But in the end its something they'll have to defend in court

Commenting has been disabled for this item.