Silvergate Bank Faces $63 Million in Fines Due to FTX-Linked Failures
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Silvergate Capital Corp, which used to own Silvergate Bank before it shut down, and its former top bosses, have agreed to pay $63 million in fines. This is to settle problems with California regulators due to poor management, especially with the crypto exchange FTX.
The California’s Department of Financial Protection & Innovation (DFPI) decided to charge $20 million in fines, while the Federal Reserve Board added another $43 million in penalties. The Securities and Exchange Commission (SEC) added another fine of $50 million, but the other fines will balance it out.
Silvergate Bank Became Popular In 2013
Silvergate Bank kicked off with the provision of banking services to cryptocurrency companies in 2013 and became popular. The bank was famous before its failure in March 2023.
When it filed for its initial public offering (IPO) in November 2018, the company had over 500 customers from the cryptocurrency industry. As of when it joined the New York Stock Exchange in 2019, this number had risen to over 750.
The bank had its tool for managing crypto deals inside the company. Additionally, it had a very close connection with the now-bankrupt crypto exchange FTX, which made regulators start investigating the bank.
The past Chief Executive Officer, Alan Lane and the former Colleague, Kathleen Fraher, have been sued. They were accused of deceiving investors regarding the force of the Bank Secrecy Act, which includes monitoring crypto clients, compliance programs, and FXT.
The former Chief Financial Officer Antonio Martino was also accused with the offense of misleading investors concerning losses from securities deals following the fall of FXT. The accusations emphasized that the bank has yet to discover the suspicious $9 billion fund transfer carried out by the main customers of FXT.
Antonio Martino Faces Charges Of Fraud And Violations
Apart from Martino, other bank members have resolved to settle the charge and accusations leveled against them, even though they did not accept or deny it. Martino has been leveled with some charges of committing fraud.
According to Gurbir Grewal, head of the SEC’s Division of Enforcement, public companies and their leaders must always be truthful with investors, especially during crises. He said that Fraher, Lane, and Silvergate did a poor job and were dishonest.
Instead of honestly telling investors about big problems in its compliance programs after the fall of FTX, one of Silvergate’s biggest banking clients, they made it seem better than it was, which misled investors about the programs’ safety.
