The United States Securities and Exchange Commission (SEC) has sued Silvergate Capital Corporation, the company behind Silvergate Bank, on July 1. The SEC alleges that Silvergate, its former CEO Alan Lane, and former Chief Risk Officer Kathleen Fraher misled investors about their compliance with the Bank Secrecy Act/Anti-Money Laundering program and client monitoring, particularly concerning FTX.
SEC enforcement director Gurbir Grewal highlighted that Silvergate failed to detect $9 billion in suspicious transfers between FTX and its related entities. Following FTX’s collapse, Silvergate allegedly misled investors, causing significant financial losses. U.S. senators had claimed that FTX directed customers to wire money to Alameda’s Silvergate account for assets on FTX, which led to improper fund transfers.
Silvergate has agreed to pay a $50 million civil penalty without admitting or denying the allegations. Lane settled for $1 million, and Fraher for $250,000, with settlements awaiting court approval. Chief Financial Officer Antonio Martino faces charges for misleading investors about the firm’s losses and aiding in violations but has not settled, arguing the allegations are unfounded.
This case underscores the importance of stringent compliance and transparency in the financial sector, especially within crypto-friendly institutions.
