Silvergate Capital has been caught in the web of FTX’s issues and is now under investigation by the United States Department of Justice (DOJ).
Currently, the crypto-inclined financial institution is being probed by the Justice Department’s fraud unit for its involvement with now-bankrupt FTX and its sister trading firm Alameda Research who were both accused of mishandling customers’ deposits.
According to a Bloomberg report, Silvergate Capital held a few accounts for the founder of FTX Sam Bankman-Fried who later resigned from his position as Chief Executive Officer (CEO) in the heat of its bankruptcy filing.
The probe is still in the early stage and the bank is yet to be levied with any charges. However, the probe is focused on a potential charge of permitting FTX deposits into Alameda Research’s account.
Silvergate Receives Several Backlash
At a certain time, a few senators wrote a letter to Alan Lane Silvergate CEO addressing its role as a bank to the bankrupt exchange, citing that it was an “egregious failure.” Sens. Elizabeth Warren, D-Mass., John Kennedy, R-La., and Roger Marshall, R-Kan., all argued that Silvergate was instrumental to the transfer of the FTX customer deposits to Alameda Research.
“Your bank’s involvement in the transfer of FTX customer funds to Alameda reveals what appears to be an egregious failure of your bank’s responsibility to monitor for and report suspicious financial activity carried out by its clients,” as per a joint statement by the senators.
The question, “Were you aware that FTX was directing its customers to wire money to Alameda’s account with your bank?”, was directed to Lane.
The senators were trying to find out if the bank flagged any of such transactions to the Financial Crimes Enforcement Network. This seems to be a setback for Silvergate especially as it is considered one of the financial institutions that tend not to violate U.S. laws.
Meanwhile, Silvergate Capital together with its CEO Lane and the CFO Antonio Martino is faced with a class action lawsuit by Pomerantz LLP in the U.S. District Court of Southern California for violating federal security laws. Based on the filed crypto-focused bank made “False and/or misleading statements, as well as {failing} to disclose material adverse facts about the Company’s business, operations, and prospects.”
