FTX-Tether Connection: Involvement Of Banks Raises Questions

Beleaguered crypto exchange FTX’s connection with Tether remains in question as the banks used by both companies are run by the same person. FTX’s Alameda Research invested $11.5 million in Farmington State Bank’s parent FBH, run by Jean Chalopin. Surprisingly, Chalopin is also the chairman of Bahamas-based Deltec Bank, the main bank of Tether.

FTX and Alameda’s Tether Connection

The bankruptcy of FTX uncovers surprising investments by SBF and raises questions about its operations, reported the New York Times on November 23. In March, FTX through its trading firm Alameda Research invested $11.5 million in a small Farmington State Bank’s parent FBH based in Washington. The bank has a single branch and three employees, with no online banking or credit card facilities.

According to the Federal Deposit Insurance Corporation, Farmington’s net worth was $5.7 million and deposits were nearly $10 million before the acquisition. However, after FTX’s deal with the bank led by Ramnik Arora, head of product at FTX, deposits jump to $84 million. The FDIC revealed the $71 million came from just four new accounts.

Jean Chalopin, chairman of Farmington and Deltec, convinced regulators to allow FTX to operate in The Bahamas. Deltec is also the main bank of stablecoin issuer Tether. Some believe Tether will be the most affected by FTX collapse as Alameda and FTX were Tether’s largest trading partners. However, Tether CTO Paolo Ardoino denied exposure to FTX.

However, experts raise concerns over yet-undiscovered ties of the stablecoin to FTX’s fraudulent operations. Alameda was Tether’s second-largest customer and received over $36 billion worth of Tether. Moreover, FTX relied on USDT for transactions. However, Tether CTO Ardoino denied saying “Alameda sent USD and got USDT,” claiming it as purely transactional.

Sam Bankman-Fried Relations with Federal Regulators

Banking experts remain confused about how federal regulators approved FTX to buy a stake in a U.S.-licensed bank. Moreover, a crypto firm buying a stake in a bank double its book value should have raised red flags for the FDIC, state regulators, and the Federal Reserve.

Moreover, SBF has also been linked to SEC Chair Gary Gensler and criticized for not preventing investors. In fact, FTX executives donated almost $70 million to both Democrats and Republicans for the mid-term campaigns.