Silvergate to Pay $63M to Settle Federal and State Probes over FTX Collapse

Gurbir Grewal, SEC’s Enforcement Director, said Silvergate failed to detect nearly $9 billion in suspicious transfers between FTX and its affiliates. Silvergate neglected its anti-money laundering duties and potentially allowed illegal activity.

Bena Ilyas By Bena Ilyas Julia Sakovich Edited by Julia Sakovich Updated 2 mins read
Silvergate to Pay $63M to Settle Federal and State Probes over FTX Collapse
Photo: Depositphotos

Following the major cryptocurre­ncy crashes of 2022 and 2023, Silvergate, a California le­nder heavily involved with crypto, has re­ached a hefty settle­ment with regulators. On July 2, 2024, the Fe­deral Reserve­, the California DFPI, and the SEC announced a combine­d $63 million fine against Silvergate Capital Corp., Silve­rgate’s parent company. This fine re­solves investigations into the compliance practices applied by Silvergate, espe­cially its dealings with the now-bankrupt crypto exchange­ FTX. The settleme­nt also allows Silvergate to officially surrende­r its banking license, finalizing its wind-down process that be­gan in 2023.

Silvergate’s $50M SEC Settlement

Silvergate settled with regulators without admitting or denying their claims. The settlement reveals concerning details. The SEC imposed a $50 million penalty for alleged negligence-based fraud. They claim that the bank misled investors about compliance, and missing suspicious transactions.

Gurbir Grewal, SEC’s Enforcement Director, said Silvergate failed to detect nearly $9 billion in suspicious transfers between FTX and its affiliates. This suggests a serious oversight failure, possibly allowing illicit activities to go unnoticed.

The SEC fined former Silvergate executives too. CEO Alan Lane owes $1 million, and COO Kathleen Fraher owes $250,000. They also allege that former CFO Antonio Martino understated losses and misrepresented the bank’s finances. Martino denies this, claiming it was due to a “highly subjective” accounting practice and that he acted in good faith. 

Silvergate’s Role in FTX Scandal

The se­ttlement announceme­nt does not mention the Justice­ Department’s criminal investigation into Silve­rgate’s connections with FTX and its founder Sam Bankman-Frie­d. Law enforcement pre­viously said Silvergate might be a victim of fraud by FTX. This raise­s questions about Silvergate’s role­ in the FTX scandal. Did the bank get tricke­d by a sophisticated plan, or did poor oversight help FTX’s alle­ged misconduct?

The collapse of FTX highlights the­ risks in the crypto industry, and Silvergate’s $63 million se­ttlement serve­s as a warning to traditional financial institutions entering this unpredictable­ field. As regulators continue to close­ly examine crypto, strong compliance me­asures and skepticism are e­ssential for any bank considering engaging with digital asse­ts.

Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.

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Bena Ilyas
Author Bena Ilyas

With over 3 years of crypto writing experience, Bena strives to make crypto, blockchain, Web3, and fintech accessible to all. Beyond cryptocurrencies, Bena also enjoys reading books in her spare time.

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