Silvergate Financial institution, once a cornerstone of the crypto financial world till its collapse in early 2023, defrauded its traders by mendacity about its anti-money laundering controls and deceptive traders about how the fallout from the FTX collapse would have an effect on it, the Securities and Change Fee says in a lawsuit. Additionally named within the swimsuit have been the corporate’s chief government officer, chief danger officer, and chief monetary officer.
Silvergate mentioned it had an efficient anti-money laundering (AML) program tailor-made particularly to crypto however really didn’t adequately monitor “roughly $1 trillion” in transactions, the criticism says. Silvergate additionally didn’t discover “almost $9 billion in suspicious transfers” by FTX entities.
When FTX collapsed, the crypto trade panicked, resulting in a run on Silvergate and a liquidity disaster. At that time, Silvergate’s chief monetary officer Antonio Martino “engaged in a fraudulent scheme to mislead traders in regards to the Financial institution’s dire monetary situation,” the SEC alleges. Martino knew the financial institution had borrowed billions, which it must repay in January and February 2023. The one method that might occur can be by promoting securities, however Martino accredited an earnings launch that “falsely acknowledged the Financial institution anticipated to promote solely $1.7 billion in securities through the First Quarter of 2023, of which it had already bought $1.5 billion.”
That earnings launch understated Silvergate’s losses from its securities gross sales, the SEC criticism alleges. Martino additionally lied on the financial institution’s quarterly earnings name, in accordance with the criticism.