The U.S. Securities and Exchange Commission (SEC) filed the complaint in 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 chief risk officer Kathleen Fraher of knowingly violating anti-money laundering laws and willfully defrauding investors.
According to the SEC complaint, from November 2022 to January 2023, the suspected offenders told customers that the company was constantly monitoring the financial situation on the FTX exchange and the bank’s related payment platform, Silvergate Exchange Network, and that it was monitoring all customer transactions for the safety of funds and security.
“At all times, and especially in times of crisis, public companies and their officers have a responsibility to be honest with the investing public. Instead of telling investors about the serious deficiencies in their compliance programs after the collapse of FTX, one of Silvergate’s largest customers, they hid information about the unreliability of their custody programs and failed to trace more than $1 trillion in customer transactions, including nearly $9 billion in suspicious transfers between FTX and related entities. Silvergate’s stock ultimately collapsed, wiping out billions of dollars in market value for investors,” said Gurbir Grewal, SEC Director of Investigations.
The regulator’s appeal to the court notes that, without admitting or denying the SEC’s allegations, Silvergate agreed to a final judgment requiring it to pay a civil penalty of $50 million. Lane and Freyer also supported the settlement agreement, agreeing to a five-year ban on professional activity and civil penalties of $1 million and $250,000, respectively.
In June 2023, the Federal Reserve Board of the United States (FRS) announced in an official notice that Silvergate Capital Corporation and Silvergate Bank had agreed to voluntary self-liquidation, taking into account all requirements of the regulator and the US Deposit Insurance Agency (FDIC).
Source: Bits
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