The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A BAHAMIAN bank and its chairman have blasted aggrieved FTX investors for employing “a Gatling gun approach” that has inflicted “tremendous damage” on their financial services reputation.

Deltec Bank & Trust, and Jean Chalopin, in an April 2, 2024, filing that again urges the south Florida federal court to dismiss a long-running class action lawsuit, both asserted that the former crypto exchange’s clients behind the claim had merely fired off “a barrage of baseless conclusions” in the hope that something will stick.

However, the Bahamian financial institution and its chairman argued that the claims “miss their mark completely” while again asserting that the Florida court lacks jurisdiction over them. They argue instead that the aggrieved investors should instead “reinstate” their action and bring it before the Bahamian judicial system.

“Plaintiffs employ a Gatling gun approach to pleading - wildly firing a barrage of baseless conclusions and implausible inferences at the defendants in the hope that something will hit its target,” their dismissal motion argues.

“Plaintiffs’ allegations directed at Deltec Bank and Mr Chalopin, however, are blanks; a loud burst of irrelevant, editorialised and often patently false statements crafted to shock and fool the reader into believing commonplace banking activity is somehow evidence of participation in a wide-ranging conspiracy. It is not.

“When the smoke lifts and the non-conclusory allegations are viewed in the proper context, plaintiffs once again miss their mark completely.... In short, the second amended complaint (SAC) includes nothing more than baseless and conclusory allegations deliberately crafted to cast Deltec Bank and Mr Chalopin in a false light and damage their reputations before the court and the public.”

The class action lawsuit appeared to gain new life and momentum in mid-February after its proponents seemingly received fresh ammunition from the production of 7,000 pages of Telegram messages - many featuring the Bahamian bank’s executives - by Sam Bankman-Fried’s former girlfriend, Caroline Ellison.

However, in their latest legal filings, Deltec and Mr Chalopin allege there is nothing to tie them to Florida that gives the US court jurisdiction over them. “There are no meaningful factual allegations (or any facts whatsoever) to support Deltec Bank’s or Mr Chalopin’s knowing participation in a conspiracy to assist FTX’s fraud,” the Bahamas-based duo allege.

“Plaintiffs, therefore, rely on implausible assumptions, unsupported speculation and innuendo, and recklessly mischaracterised communications. Even a cursory examination of plaintiffs’ hyperbolic allegations (and even taking these allegations as true), however, reveals they are baseless (at best) and wholly fail to state any claims.

“Plaintiffs’ claims against Mr Chalopin are the most straightforward examples. Plaintiffs base their alleged claims - civil conspiracy, aiding and abetting, and RICO - almost entirely on Mr Chalopin’s supposed lobbying efforts in The Bahamas to encourage the passage of laws favourable to the cryptocurrency industry, his attendance and participation at the ‘Crypto Bahamas summit’, and his alleged assistance to ‘the Bahamian government in drafting crypto-friendly’ laws ‘to attract digital asset start-ups and other crypto ventures to The Bahamas’. That’s it.

“From that flimsy foundation, plaintiffs leap to the implausible and unsupported conclusions that Mr Chalopin’s intent was somehow to transform The Bahamas into a ‘sandbox for fraud’ and to pass laws that ‘helped FTX achieve [a] veneer of regulatory compliance’,” Deltec and Mr Chalopin continued.

“According to plaintiffs, Mr Chalopin ‘surely knew’ FTX’s actual compliance with the new laws was ‘but a fig leaf’. What is missing entirely, however, are any facts needed to bridge the massive gap that exists between allegations that Mr Chalopin engaged in lawful lobbying and the unfounded conclusions that he did so with actual knowledge of - and for the purpose of aiding - FTX’s fraud or any other wrongful conduct.”

Deltec and Mr Chalopin also argued that the class action lawsuit had failed to provide any evidence they were involved in a conspiracy with FTX and its founder, Sam Bankman- Fried, who was jailed for 25 years pre-Easter for masterminding the crypto exchange’s multi-billion dollar fraud for the simple reason that “no facts exist to support it”.

However, the lawsuit and associated media coverage was said to have inflicted serious harm on both Deltec and Mr Chalopin. “The gaping holes in plaintiffs’ allegations are overshadowed by how shockingly inaccurate and reckless they are,” they argued in their motion to dismiss.

“By mining and sculpting cherry-picked fragments from longer Telegram chat messages to fit their agenda, plaintiffs have erected a Potemkin village, the apparent purpose of which is to hide the weak- ness in their claims from the court’s view and to inflict as much reputational damage as possible on Deltec Bank and Mr Chalopin.

“Indeed, plaintiffs’ allegations have caused tremendous damage to Deltec Bank, a long-standing institution in The Bahamas that has supported innovative and emerging industries as well as prominent businesses and individuals for more than 70 years.”

Accusing the former FTX investors of misrepresenting and mischaracterising what they described as routine financial services transactions, Deltec and Mr Chalopin added: “Plaintiffs selectively mischaracterise message fragments from about 7,000 pages of chat messages and add a heaping dose of rank speculation and innuendo until they are satisfied they have, as best as possible, transformed standard day-to-day bank- ing transactions into an international conspiracy.

“But this sleight-of-hand pleading tactic, which has caused significant harm to Deltec Bank and Mr Chalopin, should not be condoned. After plaintiffs’ baseless and speculative conclusions are properly setaside, the SAC(second amended complaint) does not come anywhere close to stating viable legal claims against either of them.”

The class action lawsuit is alleging that Deltec “assisted FTX group with sidestepping, if not outright violating” Bahamian laws and the Central Bank of The Bahamas’ Know Your Customer (KYC) due diligence guidelines for onboarding new customers and accounts.

It also claimed that Deltec executives copied and pasted the KYC questions from Citibank into a Telegram chat involving Alameda Research, Mr Bankman-Fried’s private trading arm that played a central role in FTX’s collapse, so it knew what it had to do to meet Citibank’s requirements.

The lawsuit also alleged that Deltec helped Alameda “track its siphoning of FTX customer funds” through the accounts the latter held with the Bahamian bank, with incoming and outgoing wires totalling between $200m and $1bn on a regular basis.