The U.S. Securities and Exchange Commission (SEC) filed a statement of claim with the U.S. District Court for the Southern District of New York on July 1. The regulator accused Silvergate Capital, its former CEO Alan Lane and former risk director Kathleen Fraher of knowingly violating the Anti-money Laundering Act and intentionally defrauding investors.
According to the SEC complaint, from November 2022 to January 2023, the suspects in the offense told customers that the company was constantly monitoring the financial situation on the FTX exchange and the associated Silvergate Exchange Network payment platform, as well as monitoring all customer transactions in terms of funds safety and security.
"At all times, and especially in times of crisis, public companies and their officials are obliged to speak honestly with the investing public. Instead of telling investors about the serious shortcomings of their compliance programs after the collapse of FTX, one of Silvergate's largest clients, they hid information about the unreliability of storage programs and failed to track more than $1 trillion in transactions of their clients. This includes almost $9 billion in suspicious transfers between FTX and related organizations. Silvergate shares eventually collapsed, wiping out billions of dollars of market value for investors," commented Gurbir Grewal, Director of Investigations at the SEC.
The regulator's appeal to the court notes that without acknowledging or denying the SEC's accusations, Silvergate agreed to a final decision obliging it to pay a civil fine of $50 million. Lane and Freyer also supported the settlement agreement, agreeing to a five-year professional ban and civil fines of $1 million and $250,000, respectively.
In June 2023, the official notification of the US Federal Reserve Board (FRS) announced the agreement of Silvergate Capital Corporation and Silvergate Bank to voluntary self-liquidation, taking into account all the requirements of the regulator and the US Deposit Insurance Agency (FDIC).