The Federal Reserve Board has terminated all enforcement measures against Silvergate Bank and Silvergate Capital Corporation after the bank’s liquidation, compensation of customers, and termination of banking operations.
Nevertheless, the Securities and Exchange Commission (SEC) is currently pursuing a legal case against Silvergate for its suspected involvement in the FTX fraud. Silvergate’s decline commenced in March 2023, amidst the crypto market upheaval instigated by the downfall of FTX.
In February 2023, the bank’s shares became the second-most targeted for short selling on Wall Street. Investor fears were further intensified by the delayed delivery of its annual 10-K form.
The SEC has initiated legal action against Silvergate, accusing the company of deceiving investors by providing false information about its anti-money laundering measures and misguiding them regarding the consequences of the FTX crash.
Silvergate has reached a settlement of $50 million with the SEC without admitting or rejecting the claims. The CEO, Alan Lane, and the Chief Risk Officer, Kathleen Fraher, reached settlements of $1 million and $250,000, respectively.
The SEC has accused Silvergate’s Chief Financial Officer (CFO), Antonio Martino, of participating in a fraudulent conspiracy to deceive investors over the bank’s severe financial situation. Martino’s side has strongly and forcefully disputed these charges, which could lead to a possible legal confrontation.
The controversy centers on Silvergate’s SEN network, which purportedly functioned without sufficient surveillance for illicit operations for a minimum of 15 months preceding November 2022.
Although the Federal Reserve may have concluded its investigation into Silvergate, the actions taken by the Securities and Exchange Commission indicate that the oversight of financial institutions involved in cryptocurrency is still ongoing.
