Three U.S. senators have asked the CEO of Silvergate to disclose details of the Silvergate Bank’s connection with bankrupt FTX. Warren and two other senators sent a letter last week to Lane raising questions about the security precautions that the La Jolla-based Silvergate Capital has in place.
Also, a class-action lawsuit claims crypto bank Silvergate is liable for their role in the FTX meltdown, as well as breaching their fiduciary duties. The lawsuit claims Silvergate Bank aided and abetted the fraudulent activities of FTX, and FTXs breaches of fiduciary duty, by improperly wiring, loaning, and pooling users’ funds.
Filing on behalf of himself and other investors, Plaintiff Joewy Gonzalez claims Silvergate Bank was involved in the FTX schemes by engaging in improper transfers, commingling funds, and lending user funds.
The lawsuit seeks to hold Silvergate bank liable for their alleged role in placing FTX users deposits in Alameda Research’s bank accounts, causing panic within the cryptocurrency markets, and ultimately leading both firms into bankruptcy. To put further pressure on Silvergate Bank, a group of Senators, including US Senator Elizabeth Warren (D-Mass), a longtime critic of cryptocurrency, sent Silvergate Chief Executive Officer Alan Lane a letter demanding that the bank reveal the bank’s dealings with FTX and Bankman-Fried.
At least two lawsuits have already been filed by shareholders in La Jolla-based Silvergate Capital, claiming that the bank made misleading statements to its investors.
Lane argues Silvergate did significant due diligence and continuous monitoring on FTX and Alameda Research accounts at the bank, processing wire transfers according to sender instructions and industry practices. Had FTX directed customers to send funds to Alameda Research accounts via Silvergate, the bank typically would not have had visibility into the relationships between the parties involved in a trade, or why a trade was made.
Photo: Silvergate Bank