Crypto-friendly bank Silvergate is coming under increased scrutiny as the U.S. Department of Justice reportedly investigates the bank’s role in the collapse of the FTX cryptocurrency exchange.
The Department of Justice’s fraud unit is looking into California-based Silvergate Bank’s hosting of accounts tied to FTX and Alameda Research, Bloomberg reported, citing anonymous sources close to the probe.
Launched in 1988, Silvergate became heavily involved in the crypto industry. In January 2022, Meta’s (then Facebook) Diem project sold its assets to Silvergate for $200 million, putting an end to Mark Zuckerberg’s stablecoin ambitions.
State Street Takes 9.32% Stake in Silvergate Bank
Asset manager State Street has disclosed a 9.32% stake in crypto bank Silvergate, a Thursday SEC filing shows. The Boston-based firm notes that the stake is passive—meaning that it doesn’t intend to change or influence the company. Silvergate has been in a pickle lately: lawmakers have just alleged that the bank “further introduced crypto market risk into the traditional banking system,” and demanded Silvergate provide more information. Last month, the banking group said it would cut 40% of its...
After the collapse of FTX in November 2022, Silvergate reported that worried investors pulled $8.1 billion in crypto deposits in an epic bank run that some called worse than those seen during the great depression.
In January, Silvergate announced the company would cut its staff by 40%. Silvergate stock dropped 40% in premarket trading after news of the layoffs broke.
Regulators have also taken aim at Silvergate, with Senators Elizabeth Warren (D-Mass.), John Kennedy (R-La), and Roger Marshall (R-Kan) saying in a letter to Silvergate CEO Alan Lane that the bank has “further introduced crypto market risk into the traditional banking system” through its dealing with Bankman-Fried and FTX.
Crypto Industry 'Scared of a Strong SEC': Sen. Elizabeth Warren
Massachusetts Senator Elizabeth Warren had strong words for the crypto industry on Wednesday, calling on the U.S. Securities and Exchange Commission to do more to fight crypto fraud. In prepared remarks delivered before the American Economic Liberties Project, Warren said industry players are “scared of a strong SEC." “The SEC has brought enforcement actions against celebrity crypto promoters for not disclosing their compensation to the public. It has gone after the employees at exchanges like C...
For her part, Warren recently called on banking regulators to do more in investigating what she called “crypto-friendly” banks like Silvergate, accusing the firm of opening the banking system up to the greater risk of “crypto collapse”—which she says will leave the American taxpayers holding the bag.
“It’s the bank regulators’ job to insulate the banking system and taxpayers from the risk of crypto fraud,” she said. “They have the tools, and they need to use them.”
Decrypt reached out to the Department of Justice for comment but has yet to receive a response.
