Silvergate settles for $50 million penalty following SEC charges

The United States Securities and Exchange Commission (SEC) has sued Silvergate Capital Corporation, the firm behind the crypto-friendly Silvergate Bank.

According to a July 1 filing, the commission alleges that Silvergate, along with its former CEO Alan Lane and former Chief Risk Officer Kathleen Fraher, misled investors regarding its Bank Secrecy Act/Anti-Money Laundering compliance program and the “monitoring” of its clients like FTX.

SEC enforcement director Gurbir Grewal said in the filing that Silvergate failed to detect “$9 billion in suspicious transfers among FTX and its related entities.” He added that the bank and its executives allegedly “doubled down” on misleading investors following FTX’s collapse.

Per Grewal, these actions resulted in significant losses for investors.

Following FTX’s bankruptcy filing, Silvergate opted for voluntary liquidation in March 2023. The move came as several of the bank’s clients, like Coinbase and Gemini, cut ties due to the firm’s connections with FTX.

At the time, U.S. senators Elizabeth Warren, Roger Marshall and John Kennedy claimed in a letter to Silvergate that FTX had “directed customers to wire money to Alameda’s account with Silvergate in exchange for assets” on FTX.

Former FTX CEO Sam Bankman-Fried had also admitted that FTX did not have an account with Silvergate and that funds were “improperly transferred to Alameda’s bank accounts.”

Bankman-Fried is currently serving a 25-year sentence in federal prison.

As of now, the filing states that Silvergate has agreed to pay a $50 million civil penalty. However, the bank has neither admitted nor denied the allegations against it.

Lane also settled a $1 million fine, and Fraher agreed to pay $250,000. The settlements are subject to court approval.

The regulator has also charged Silvergate Chief Financial Officer Antonio Martino for “misleading” investors about the firm’s “losses from expected securities sales following FTX’s collapse.”

He is also accused of violating the “antifraud and books-and-records provisions of the federal securities laws, Additionally, he is charged with “aiding” Silvergate in some of its violations.

However, Martino has not settled with the SEC.  He argues that the SEC’s allegations are “unfounded and irresponsible.”

According to Martino’s legal team, he will pursue legal action to clear his name.