Brazilian Authorities: Tether's New Banking Partner, Deltec, Might Have Accepted Laundered Funds

  • Tether's new banking partner, Deltec Bank, may be holding laundered funds.
  • Brazilian prosecutors allege that the former director of a road infrastructure company in Brazil may be involved in laundering the funds.

Controversial stablecoin issuer, Tether Ltd. (USDT), had announced on November 1st that Bahamas-based Deltec Bank & Trust is its new banking partner. On November 6th, Brazilian news outlet, O Globo, reported that Deltec bank may have accepted laundered funds.

According to reports, the Federal Public Prosecutor's Office in São Paulo, Brazil is actively looking for Paulo Vieira de Souza, the former director of the São Paulo road infrastructure company (DERSA).

De Souza is suspected of being involved in the Odebrecht case - which the US government has described as “the largest foreign bribery case in history.” While working at DERSA, De Souza reportedly transferred 25 million Swiss Francs ($25,071,250) to an account belonging to the Nantes Group (a Panama-based offshore firm).

The Nantes Group’s account was managed by Bordier & Cie (a private Swiss bank owned by the Bordier family), and De Souza was the beneficiary of this account.

Laundered Funds Might Be At Deltec Bank

However, an investigation being carried out by De Souza’s prosecutors has revealed that the laundered funds may have been transferred from Nantes Group’s accounts to those managed by Deltec bank (in February 2017).

Specifically, these funds were transferred to Deltec bank’s headquarters in Bahamas’ capital city, Nassau - which is the same financial institution that recently opened a bank account for Tether Ltd.

At present, De Souza’s prosecutors in Brazil are waiting for authorities in the Bahamas to confirm whether the laundered sum is actually deposited at Deltec bank’s branch in Nassau.

Brazilian officials and Bahamas’ government have previously investigated several other money laundering cases.

Tether's Letter Is "Authentic"

As CryptoGlobe reported in early October, Tether had parted ways with Puerto Rico-based Noble bank and then recently opened an account with Deltec bank. On November 5th, the chairman of Deltec Bank & Trust confirmed that the letter published by Tether (regarding its account balance with the bank) was “authentic.”

As covered, Tether had shared a letter which showed that it had a balance of over $1.8 billion - which was held at an account with Deltec bank (according to the letter). When Bloomberg tried to confirm whether Tether was one of the bank’s clients, Deltec’s representatives refused to comment on the matter.

However, Deltec bank chairman, Jean Chalopin, sent a message to Coindesk stating that “the letter published by Tether is authentic.”

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Trans-Fee Mining Crypto Exchange 'FCoin' Insolvent After Mistakenly Being Too Generous

One of the first cryptocurrency exchanges to adopt the controversial trans-fee mining (TFM) model, which has been called a “disguised ICO” has paused trading and withdrawals over a shortage of crypto worth up to $130 million.

According to a statement published by FCoin’s founder Zhang Jian, a former Huobi CTO, the exchange is now unable to process withdrawals as its reserves are down by between 7,000 to 13,000 bitcoin, worth over $130 million at press time, over an issue that’s “a little too complicated to be explained in a single sentence.”

Zhang’s statement details the cryptocurrency exchange wasn’t hacked, nor is it pulling an exit scam on its users. He detailed that an internal system error gave users more mining rewards than they should have received, noting the error wasn’t detected for a long period of time.

The transaction-fee mining model, which saw FCoin’s trading volume surpass $5 billion per 24 hours numerous times, sees the cryptocurrency exchange incentivize trading via its own token, FT. FCoin reimbursed users for transaction fees paid in BTC or ETH with FTs until 51% of the coin’s supply was distributed, and redistributed 80% of the BTC and ETH it collected to those holding FT tokens.

The controversial model drew criticism and saw Zhang defend it, claiming it was a misunderstood invention. At the time, he said:

If you look back at history, all new things were not recognized at the beginning. Many were believed to be fraud. Jack Ma was recognized as a fraud when he first promoted the internet in China.

Various cryptocurrency exchanges started adopting the TFM model shortly after, with research showing these platforms had unusually thin order books and low traffic taking into account the trading volumes they had.

According to Zhang, the errors in FCoin’s system gave away too many tokens in mining rewards from mid-2018 to mid-2019, when a complete back-end auditing system was implemented. As throughout 2019 the price of FT kept on dropping, Zhang and his team reportedly used their own funds to buy back tokens and drive up demand, a decision he claims was an error.

This, as it gave users a chance to sell their FT tokens and withdraw as much as possible from their accounts, while FCoin bought up tokens that kept on losing value. Zhang’s announcement came shortly after FCoin suspended its platform over a risk-control issue.

Zhang is now reportedly manually processing users’ withdrawal requests sent via email. The founder of the exchange claimed he will “switch tracks” to start again, and noted he hopes he can use the profits made from new ventures to “compensate everyone for their losses.”

Featured image via Unsplash.