Silvergate settles SEC lawsuit for $50 million; Fed, California regulator demand $63 million fine

Silvergate Capital settled with the SEC for $50 cardinal arsenic Federal Reserve governors and California fiscal regulators demanded $63 cardinal successful fines connected July 1.

The SEC claimed Silvergate Capital, its subsidiary Silvergate Bank, and 2 executives misled investors astir the spot of its BSA/AML compliance programme and the monitoring of crypto customers, including the speech FTX.

The company’s assurances partially aimed to refute claims that FTX utilized Silvergate accounts to transportation retired its fraud. Silvergate’s automated monitoring strategy supposedly failed to show implicit $1 trillion of lawsuit transactions connected Silvergate Exchange Network (SEN).

The alleged wrongdoing took spot betwixt November 2022 and January 2023

The SEC’s colony besides imposes a $1 cardinal civilian punishment connected erstwhile Silvergate CEO Alan Lane, a $250,000 civilian punishment connected erstwhile Silvergate Chief Risk Officer Kathleen Fraher, and imperishable injunctions connected the companies and executives. Lane and Fraher additionally agreed to five-year officer-and-director bars.

Silvergate, Lane, and Fraher settled without admitting oregon denying the SEC’s allegations. All settlements are taxable to tribunal approval.

The SEC besides alleged Silvergate and its erstwhile CFO, Antonio Martino, misled investors astir the company’s losses from expected securities income aft FTX’s collapse. The SEC charged Martino, who has not yet settled, with violations of national securities laws.

Fed and California DFPI actions

The Federal Reserve Board of Governors and the California Department of Financial Protection and Innovation (DFPI) announced parallel actions and are seeking $63 cardinal successful fines.

The parallel actions bash not specifically notation Silvergate’s engagement with FTX but notation to Silvergate’s handling of crypto and monitoring failures.

According to each property release, Silvergate tin offset the $50 cardinal it owes to the SEC by paying the amounts successful the Federal Reserve and DFPI actions.

Silvergate unopen down successful March 2023. The steadfast submitted an SEC filing stating that it faced investigations from the DOJ and intended to record a precocious 10-K report, preceding a driblet successful the terms of Silvergate shares and, ultimately, the firm’s collapse.

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