The crypto-friendly bank Silvergate has agreed to settle with the Securities and Exchange Commission (SEC) of the USA, paying a penalty of 63 million dollars. The complaint, which has neither been denied nor admitted, sees Silvergate guilty of not maintaining an adequate anti-money laundering program.
Silvergate: the crypto-friendly bank and the settlement with the SEC for the accusations on the anti-money laundering program
Yesterday, the Securities and Exchange Commission (SEC) of the United States sued Silvergate Capital Corporation, the parent company of the crypto-friendly bank Silvergate Bank, along with former CEO Alan Lane, former COO Kathleen Fraher and former CFO Antonio Martino.
The denuncia accuses the bank of deceiving the public and shareholders, claiming to have an effective Bank Secrecy Act, or anti-money laundering, program, while it did not.
In addition to the SEC, the Federal Reserve and the California Department of Financial Protection and Innovation (DFPI) have also joined the accusation.
The result is that Silvergate, Lane, and Fraher have agreed to settle, without admitting or denying the SEC’s allegations, but they will pay penalties. Not only that, the former CEO and the former COO have also agreed to a five-year ban from being officers or directors of another public company.
Only the former CFO Martino, on the other hand, denied the accusations through a statement from his lawyers. For Martino, the accusations are related to a single quarter of 2022 and concern decisions “guided by judgment”.
The penalty that Silvergate has agreed to pay is 43 million dollars from the Fed and 20 million dollars from the Californian regulatory authority.
Silvergate: the SEC’s accusation against the crypto-friendly bank
The investigations by the SEC and Fed into the crypto-friendly bank have revealed the following:
“On various occasions before November 2022, Lane and Fraher – and through them the SCC – realized that the Bank had serious deficiencies in its BSA/AML compliance program”
In practice, for the accusation, it seems that the bank was well aware that there were critical deficiencies in their anti-money laundering program.
Indeed, the SEC argues that Silvergate failed to detect suspicious transfers for nearly 9 billion dollars by the main client, the failed crypto-exchange FTX.
According to what reported, a spokesperson for Silvergate would have instead stated the following:
“At the beginning of March 2023, Silvergate made the responsible decision to voluntarily liquidate without government assistance. In November 2023, all deposits were refunded to bank customers and Silvergate ceased banking operations shortly thereafter. The agreements announced today, which will facilitate the withdrawal of Silvergate’s bank card, are part of the orderly liquidation process of the bank and successfully conclude the investigations by the Federal Reserve, the DFPI, and the SEC”
The announcement of the voluntary liquidation
In March of last year, Silvergate Bank surprised everyone with its announcement of “voluntary liquidation” of its assets, in order to close all operations.
Such a decision was a real surprise for many industry operators, given the prominent position of the crypto-friendly bank. In fact, before this announcement, Silvergate Bank was talking about expanding its services, including loans in criptovalute.
There are those who indeed thought that such a decision was just a strategy, perhaps to allow Silvergate to focus on its core business or to reduce expenses, or an opportunity to streamline its activities to improve its financial performance.
At the moment, however, it seems that such a decision was not made for a prosperous future of the bank, but to make room for something else.