Silvergate, of crypto infamy, sued by SEC for securities fraud

By Claudia Assis

Silvergate liquidated assets in March 2023, swept up by FTX Trading's collapse

U.S. securities regulators late Monday charged Silvergate Capital Corp. and two of its executives with securities fraud, the latest chapter for the once crypto-friendly bank swept up by the collapse of FTX Trading.

Silvergate's former Chief Executive Alan Lane and former Chief Risk Officer Kathleen Fraher allegedly misled investors about the strength of the company's anti-money-laundering compliance program and the monitoring of its high-risk crypto customers, including FTX, the SEC said.

Additionally, former Chief Financial Officer Antonio Martino allegedly misled investors about the company's losses from expected securities sales following FTX's collapse, the SEC said.

Lane and Fraher have agreed to settle the charges, the regulators said.

The SEC's complaint alleges that instead of monitoring its crypto customers and putting in place an "effective" compliance program, Silvergate Capital's wholly owned subsidiary, Silvergate Bank, failed to monitor more than $1 trillion of transactions by its customers on the bank's payments platform, the Silvergate Exchange Network.

"Rather than coming clean to investors about serious deficiencies in its compliance programs in the wake of the collapse of FTX, one of Silvergate's largest banking customers," the executives doubled down in a way that misled investors about the soundness of the programs, Gurbir S. Grewal, director of the SEC's enforcement division, said in a statement.

Silvergate's stock (SICP) eventually cratered, wiping out billions in market value for investors, he said.

Silvergate Capital wound down operations and liquidated Silvergate Bank in March 2023.

Shortly after, Silicon Valley Bank collapsed in the second-largest bank failure in U.S. history, Signature Bank was shut down by state regulators, and J.P. Morgan swooped in to rescue First Republic Bank after First Republic's assets were seized by the FDIC.

-Claudia Assis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-01-24 1724ET

Copyright (c) 2024 Dow Jones & Company, Inc.