Silvergate Settles SEC Fraud Charges for $50 Million After Accusations of Lax Anti-Money Laundering and Downplaying FTX Fallout

The Verge reported that the SEC is accusing Silvergate Bank, a former leader in crypto finance, of defrauding investors by lying about their anti-money laundering controls and how the FTX collapse would affect them. The lawsuit also targets the bank's former CEO, chief risk officer, and chief financial officer.

Silvergate settled the charges for $50 million without admitting fault. The CEO and CRO also reached settlements for smaller amounts. The SEC alleges Silvergate bragged about a strong anti-money laundering program but failed to properly monitor a massive amount of transactions. They also claim the bank missed a significant amount of suspicious transfers by a major customer, FTX.

Things got worse when FTX went bankrupt. The SEC alleges the CFO misled investors about Silvergate's financial health and the impact of the bank run that followed. An earnings release is also accused of downplaying how much money Silvergate needed to raise.

The SEC further claims Silvergate's system for crypto transactions lacked proper monitoring for suspicious activity for over a year. Government regulators reportedly warned Silvergate throughout 2022 about problems with their compliance program. The CFO, through his lawyer, denies any wrongdoing and plans to fight the SEC's accusations in court.

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The Verge