Late Monday, U.S. securities regulators filed a lawsuit against Silvergate Capital Corp. and two of its executives, accusing them of securities fraud. This marks the latest development for the former crypto-friendly bank, which was significantly impacted by the downfall of FTX Trading.
According to the SEC, Silvergate’s ex-CEO Alan Lane and former Chief Risk Officer Kathleen Fraher misled investors regarding the robustness of the company’s anti-money laundering compliance program and its monitoring of high-risk crypto clients, including FTX. Additionally, the SEC alleges that former CFO Antonio Martino provided false information about the company’s anticipated losses from securities sales following FTX’s collapse.
Lane and Fraher have agreed to settle the charges, as reported by the regulators.
The SEC’s complaint highlights that instead of implementing an “effective” compliance program and properly overseeing its crypto clients, Silvergate Capital’s subsidiary, Silvergate Bank, neglected to monitor over $1 trillion in transactions made by customers on its payments platform, the Silvergate Exchange Network.
Gurbir S. Grewal, the SEC’s enforcement division director, stated that instead of being transparent with investors about significant flaws in its compliance programs after FTX’s collapse, the executives misled investors about the programs’ soundness. Consequently, Silvergate’s stock plummeted, erasing billions in market value for investors, he added.
Silvergate Capital ceased operations and liquidated Silvergate Bank in March 2023.
Following this, Silicon Valley Bank experienced the second-largest bank failure in U.S. history, Signature Bank was closed by state regulators, and J.P. Morgan stepped in to rescue First Republic Bank after its assets were seized by the FDIC.
Source: Marketwatch
