The US Securities and Exchange Commission (SEC) has taken legal action against Silvergate, alleging the crypto-friendly bank's involvement in fraud related to the now-bankrupt crypto exchange FTX.
Filed on July 1 in the US District Court for the Southern District of New York, the lawsuit targets Silvergate, former CEO Alan Lane, and former Chief Risk Officer Kathleen Fraher.
The SEC accuses the bank and its executives of misleading investors about the effectiveness of their Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program and their oversight of crypto clients, including FTX, from November 2022 to January 2023.
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Gurbir Grewal, SEC enforcement director, claimed that Silvergate failed to detect nearly $9 billion in suspicious transfers between FTX and its affiliated entities, resulting in significant investor losses.
Silvergate, Lane, and Fraher have agreed to financial settlements pending court approval. Silvergate has consented to a $50 million civil penalty, while Lane and Fraher have agreed to pay $1 million and $250,000, respectively.
Meanwhile, former Chief Financial Officer Antonio Martino, who faces charges of deceiving investors about the company's losses from anticipated securities sales following FTX's collapse, plans to defend his reputation in court. He stated:
The allegations made by the SEC are unfounded and irresponsible, and I look forward to presenting my case in court and clearing my name.
Additionally, a judge recently approved a class-action lawsuit filed by FTX users against Silvergate, alleging the bank's awareness of fraudulent activities at FTX, which Silvergate has denied.
Silvergate's troubles escalated after several crypto companies, including Coinbase, cut ties with the bank in March 2023, citing its connections to FTX, which led to Silvergate's voluntary liquidation.
The SEC's lawsuit against Silvergate highlights the ongoing scrutiny and legal challenges facing entities linked to the FTX scandal.
FTX collapsed and filed for bankruptcy in November 2022, leading to criminal charges against its executives, including former CEO Sam Bankman-Fried, currently serving a 25-year prison sentence.
