By NEIL HARTNELL
Tribune Business Editor
The role played by FTX’s former Bahamian chief in arranging a $50m loan to Deltec Bank & Trust’s parent company yesterday came under scrutiny through fresh legal filings.
Documents filed with the Delaware Bankruptcy Court, which provide a solution for the Bahamian bank’s parent to repay both the principal debt and interest if approved by the judge, raise questions as to whether Ryan Salame, ex-chief executive of FTX Digital Markets, had the necessary authority to enter into the transaction.
Mr Salame, who headed the collapsed crypto exchange’s Bahamian subsidiary, represented that he was acting as a director of Norton Hall Ltd, the Antiguan-incorporated entity that executed the loan agreement with Deltec on October 25, 2021. Yet a “statement of facts” supplied by Corporate & Trust Services (Caribbean), an Antigua corporate services provider, and dated March 29, 2023, states it has been Norton Hall’s “sole director” since the company was formed.
Referring to Sullivan & Cromwell (S&C), the attorneys for FTX’s US chief, John Ray, CTS said: “S&C has informed CTS that, on October 25, 2021, Ryan Salame, under the title of director of Norton Hall, executed and delivered a promissory note, dated as of October 12, 2021, between Norton Hall and Deltec International Group.
“To the knowledge of CTS, Ryan Salame is not - and has never been - a director of Norton Hall. CTS, as director of Norton Hall, did not authorise the Deltec International Group promissory note. CTS, as director of Norton Hall, was not aware of the Deltec International promissory note prior to being informed of its existence by S&C, and Norton Hall did not disburse any amounts to Deltec International Group in connection with the promissory note.”
And Deltec, too, has asserted it was unaware of any of this - or that the funding actually came from Alameda Research - when it agreed to the $50m loan deal. CTS, meanwhile, said it has held all Norton Hall’s common stock, some 10,000 shares, since that company was formed on November 27, 2020, on behalf of its true beneficial owner, FTX founder Sam Bankman-Fried.
It thus appears that CTS was bypassed, with Mr Salame likely doing Mr Bankman-Fried’s bidding over the Deltec loan and purporting to act as a Norton Hall director even though he had no standing to do so.
This, though, will be of little concern or consequence for Deltec, which has simply wanted to know to whom - and how - it is to repay the $50m and due interest following FTX’s early November 2022 implosion. Deltec, in a statement responding to Tribune Business inquiries last night, said: “In the ordinary course of business, Deltec International Group (DIG) seeks debt financing to fund its strategic growth initiatives.
“In October 2021, Deltec International Group received a short-term loan for this purpose in the amount of $50m from Norton Hall Ltd, an entity affiliated with FTX. Deltec International Group has been attempting to repay the loan since December 2022, and needs clarity on which entity to repay because of FTX’s poor record-keeping.
“A motion has been filed, at Deltec International Bank’s request, to clarify the correct FTX entity for Deltec International Group to repay the full amount to, and we await the court’s decision.” The court papers, seeking an Order from the Delaware Bankruptcy Court that will allow Deltec to repay what is owed, identify the ultimate source of the $50m financing as Alameda Research, Mr Bankman-Fried’s private trading vehicle and hedge fund.
The promissory note, which secured Deltec’s repayment of the loan, was executed by the Lyford Cay-based bank’s parent on October 22, 2021. Mr Salame signed on Norton Hall’s behalf three days’ later and, on that very same day of October 25, 2021, he and Alameda Research signed a separate promissory note whereby the FTX Bahamas chief “agreed to pay to Alameda the principal amount of $50m plus accrued interest”.
“On October 25, 2021, a loan receivable due from Ryan Salame to Alameda in an amount of $50m was recorded in the books and records of Alameda in relation to the Salame promissory note,” the Delaware court filings stated. The $50m was transferred to Deltec on November 4, 2021, in the form of Tether stablecoins, which are backed one:one by US dollar fiat currency. It was moved between Alameda’s and the bank’s accounts on the FTX Trading platform.
“The debtors [Mr Ray and his team] have been in discussions, and reached agreement, with Deltec International Group, Norton Hall and Ryan Salame regarding the repayment of the Deltec International Group promissory note, and the related extinguishment of the Deltec International Group promissory note and the Salame promissory note,” the court papers disclosed.
“The debtors understand that Deltec International Group does not dispute that the proceeds of the Deltec International Group promissory note were paid solely from the account of a debtor, and that Norton Hall did not disburse any amounts to Deltec International Group in connection with the Deltec International Group promissory note.
“Deltec International Group has represented to the debtors that, at the time Deltec International Group executed the Deltec International Group promissory note and received the $50m payment, Deltec International Group was not aware that the $50m payment had been made from an account in the name of Alameda.”
The proposed resolution will result in Alameda Research and its creditors recovering the full $50m loan principal from the Bahamian bank and trust company’s parent, plus interest, while also discharging all the obligations it, Mr Salame and Norton Hall have.