• The US Department of Justice is investigating Silvergate Capital Corp. for its dealings with bankrupt crypto firm FTX and its sister concern Alameda Research.
• The DoJ has charged the CEOs of FTX and Alameda Research with fraudulent activities, leading to a net loss of $1 billion for Silvergate in 2022.
• There are increasing calls from federal prosecutors and senators for details on the bank’s risk management practices, raising the possibility of criminal charges against Silvergate.
The DOJ Probes Into Silvergate
The United States Department of Justice has launched a probe into Silvergate Capital Corp. and its dealings with bankrupt crypto firm FTX and its sister concern Alameda Research. Prosecutors have been charging the CEOs of FTX and Alameda Research with fraudulent activities, which resulted in a net loss of $1 billion for Silvergate in the fourth quarter of 2022.
Silvergate’s involvement in hosting accounts tied to businesses associated with FTX founder Sam Bankman-Fried has caused their shares to lose 88% of their value in 2022. This led to drastic layoffs at the bank as well as increased scrutiny from government bodies and policymakers seeking details on the bank’s risk management practices. Federal prosecutors in the DoJ’s fraud section are conducting a criminal probe into Silvergate’s operations, further raising suspicions that criminal charges could be brought against them.
Silvergate used to be a small US organization before it went public in November 2019, after which it quickly became one of the major players in crypto banking services, offering services to companies shut out by traditional banking providers. Its shares rose significantly until 2022 when FTX collapsed and resulted in two-thirds of its customer base withdrawing deposits totaling over $8 billion from SilverGate Bank due to FUD among investors.
Bipartisan Calls For Details
A bipartisan group of United States Senators requested information from SilverGate about its risk management practices and dealings with FTX, highlighting how serious this investigation is becoming for them. Furthermore, increased judicial scrutiny has weighed down on their performance due to anti-crypto sentiments among most U.S government departments making any charges brought against them more likely than ever before..
In conclusion, while no charges have been brought against SilverGate yet, they are facing an uphill battle due to increasing judicial scrutiny stemming from their dealings with bankrupt crypto firms like FTX and Alameda Research resulting in many losses for them both financially and reputationally amongst investors