Silvergate Bank Slammed With $62 Million Fine, SEC Presses 

The defunct cryptocurrency pro-bank Silvergate Bank has been slammed with a $63 million fine by the United States Securities and Exchange Commission (SEC). The charges included in the latest filing include the bank’s mismanagement of cryptocurrency transactions and non-compliance with financial regulations.

This latest development has marked a major change in the bank’s operations. Before the latest development, Silvergate Bank was one of the pioneers of cryptocurrency banking, to bridge the gap between conventional banking systems and cryptocurrencies. The bank was on the verge of achieving this milestone before its unfortunate collapse in 2023.

Kathleen Fraher, the bank’s former chief risk officer (CRO), and  Alan Lane, the former Chief Executive Officer (CEO) have conceded to pay the fine without denying or yielding to the allegations. The bank is facing permanent injunctions, with a penalty of $250,000 and $1 million respectively. 

OCC Claim Silvergate’s Framework Not Obtainable 

The Comptroller of the Currency (OCC) claimed that Silvergate’s compliance framework was inadequate to manage the particular risks associated with digital assets. It was discovered that the bank’s procedures for identifying and disclosing suspicious activity were deficient, which resulted in many cases of possibly illegal transactions going undetected.

SEC, on Monday, July 1, dragged Silvergate Capital Corp to the United States Federal Court accusing it of fraud and other related offences. According to the SEC, the company is into a “fraudulent scheme,” misleading the investors about the actual bank operations including its shambled financial state.

SEC has also claimed that Silvergate ignored suspicious transactions that amount to almost $9 billion conducted by FTX and its allied entities. Along with the penalties, Silvergate is the target of a complaint brought by the SEC, which claims the bank broke federal securities laws by failing to adequately disclose the risks involved in its cryptocurrency transactions.

According to the SEC’s complaint, Silvergate misled or withheld important information from investors and regulators on multiple occasions, giving a false impression of the company’s operational risks and financial health.

Former Silvergate Bank Boss Sued For Deception

Antonio Martino, the Ex-Chief Financial Officer at Silvergate Bank has been sued for deceiving investors about the operations of the bank, which ended in a loss of assets. The victims were said to have lost out from the sales of securities after the collapse of FTX. Martino has presently moved to challenge the charges in court.

Michael Carter, a financial analyst at CryptoWatch, stated, “Silvergate was a major player in the crypto banking space, and this action highlights the regulatory challenges that come with bridging traditional finance and digital assets.”

A California-based bank: The La Jolla, was named one among the four United States banks that collapsed alongside Silvergate in 2023. Similar to the Silicon Valley Bank incident, Silvergate was reported to have sold its debt securities at a loss, as customers rushed to make a $8 billion withdrawal.

Silvergate Bank Management Says Customer’s Deposits Repaid, Spend $63 Million

Silvergate, in March 2023 announced it would be shutting down its operation and willingly liquidating its assets after suffering major losses during the collapse of FTX hence triggering a further decline in the digital asset market. Silvergate Capital spokesperson, in an official statement, revealed that all customer deposits have been repaid to appropriate owners.

SEC’s Director of Enforcement, Gurbir Grewal, in his statement, said that instead of Silvergate explaining to its investors its dwindling financial health as a result of FTX failure, it chose to apply methods that deceived investors about the operations of its investment programs. The published settlement arrangement would guarantee the successful transfer of Silvergate’s bank charter.

The bank had spent $63 million in the settlement, which was divided among the participating regulatory organizations. $20 million will be paid to the California Department of Financial Protection and Innovation (DFPI), while the Federal Reserve gets $43 million. The SEC will also be assessing $50 million.