Silvergate Bank, a prominent player in the crypto financial world, faced a downfall in early 2023 due to fraudulent activities, as per the Securities and Exchange Commission (SEC) lawsuit. The bank deceived investors by providing false information about its anti-money laundering controls and the impact of the FTX collapse. The lawsuit also implicated the company’s CEO, chief risk officer, and chief financial officer.
To settle the charges, Silvergate agreed to pay $50 million without admitting guilt. Additionally, CEO Alan Lane and CRO Kathleen Fraher settled for $1 million and $250,000, respectively.
The complaint revealed that Silvergate misrepresented its AML program tailored for cryptocurrencies, failing to monitor around $1 trillion in transactions and missing nearly $9 billion in suspicious transfers by FTX entities.
Furthermore, the SEC accused Silvergate’s CFO, Antonio Martino, of engaging in a fraudulent scheme to mislead investors about the bank’s financial situation. Martino approved an earnings release that falsely stated the bank’s ability to repay borrowed funds through securities sales, understating losses from these sales.
The SEC highlighted Silvergate’s network, SEN, which facilitated crypto transactions round the clock. Despite claims of safety, the network was not automatically monitored for suspicious activities for over 15 months before November 2022, raising serious concerns.
Government examiners had previously warned Silvergate’s leadership about inadequate compliance with the Bank Secrecy Act. The SEC also pointed out instances of false information in earnings statements, including claims of a “state-of-the-art” compliance program.
In a recent update, a settlement and additional details on FTX were provided. The article sheds light on the intricate web of deceit and regulatory violations that led to Silvergate Bank’s downfall in the crypto world.
