- In a lawsuit, Silvergate Bank and its CEO Alan Lane were accused of aiding and abetting a fraudulent scheme orchestrated by SBF.
- Recently, Coinbase announced that it would no longer be involved with the bank business-wise.
It was recently reported that crypto bank Silvergate is being investigated by the United States Department of Justice fraud unit for hosting accounts linked to the collapsed FTX empire. FTX CEO Sam Bankman-Fried has been charged with wire and securities fraud and money laundering. In a separate lawsuit, Silvergate Bank and its CEO Alan Lane were accused of aiding and abetting a fraudulent scheme orchestrated by SBF.
According to the plaintiff, the bank failed to detect occurrences of money laundering in an amount exceeding $425 million. For this reason, the company was likely to face regulatory repercussions.
While this is said to be a mere effort for the bank to be investigated to uncover the extent to which it was involved with FTX and Alameda, some major firms have, however, decided to terminate their relationship with Silvergate Bank. Recently, Coinbase announced that it would no longer be involved with the bank business-wise.
In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
Crypto firms terminate their relationship with Silvergate
Unfortunately for the bank, other firms including stablecoin issuers Paxos and Circle and Mike Novogratz’s Galaxy Digital have taken a similar stance. On March 2, Galaxy Digital announced to its followers that it has stopped initiating or receiving transfers from the bank out of caution. Similarly, Paxos has announced that it has discontinued all transfers and wires from the bank. However, it will continue to process all payments to the bank. Circle has hinted that it is in the process of halting certain services with the bank. Bitstamp has also warned that it is not responsible for any funds deposited into the Silvergate Bank accounts.
As a precautionary measure in light of recent news, we are no longer processing transfers with Silvergate.
Bank transfer services will now be provided by our other global banking partners. Bitstamp client funds remain secure and fully available.
Recently, Silvergate’s annual 10-K required by the US Securities and Exchange Commission was delayed. They, however, pleaded for two more weeks to complete the report for the 2022 fiscal year, making its stock record another 40 percent fall in pre-market trading. The bank explained that it sold additional debt securities in January and February and expects more losses in the coming months.
These additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank (the “Bank”), and could result in the Company and the Bank being less than well-capitalized.
Following the insolvency scare, JP Morgan downgraded Silvergate Capita from “neutral” to “underweight”.
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In the last quarter, the bank recorded about a $1 billion loss following the collapse of FTX in November. In addition, the bank laid off about 40 percent of its staff and also hinted that it will take billions of dollars in loans to prevent a liquidity crisis and bank run.
The decision by crypto firms to terminate their relationships with Silvergate could have a marginally negative impact on the crypto market.
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