TLDR
Silvergate
Capital
Corp.,
the
parent
company
of
the
now-defunct
crypto-friendly
Silvergate
Bank,
has
agreed
to
pay
$63
million
to
settle
charges
brought
by
U.S.
and
California
regulators.
The
settlement
addresses
allegations
of
internal
management
failures
and
misleading
disclosures
to
investors
about
the
effectiveness
of
its
anti-money
laundering
program.
The
U.S.
Securities
and
Exchange
Commission
(SEC)
filed
a
lawsuit
against
Silvergate
Capital
Corporation
and
its
former
executives,
including
CEO
Alan
Lane,
COO
Kathleen
Fraher,
and
CFO
Antonio
Martino.
The
SEC
accused
the
bank
of
misleading
the
public
and
shareholders
about
having
an
effective
Bank
Secrecy
Act/anti-money
laundering
(BSA/AML)
program
when
it
did
not.
According
to
the
SEC’s
complaint,
Silvergate
failed
to
detect
nearly
$9
billion
worth
of
suspicious
transfers
by
its
major
customer
FTX,
the
crypto
exchange
that
filed
for
bankruptcy
in
November
2022.
The
regulators
allege
that
for
most
of
2021
and
2022,
the
bank
did
not
conduct
appropriate
automated
monitoring
of
its
Silvergate
Exchange
Network
(SEN),
a
key
product
for
crypto
asset
customers
to
transfer
funds.
The
Federal
Reserve
and
California’s
Department
of
Financial
Protection
and
Innovation
(DFPI)
brought
similar
charges
against
the
La
Jolla,
California-based
lender.
Silvergate’s
penalties
include
$43
million
from
the
Fed
and
$20
million
from
the
California
regulator.
The
SEC
imposed
its
own
$50
million
fine,
which
may
be
offset
by
payments
to
the
banking
regulators.
Silvergate,
Lane,
and
Fraher
agreed
to
settlements
where
they
neither
admit
to
nor
deny
the
SEC’s
allegations.
However,
they
will
pay
penalties,
and
the
two
former
executives
agreed
to
a
five-year
ban
on
being
officers
or
directors
of
another
public
company.
Martino,
the
former
CFO,
has
denied
the
allegations
through
his
attorneys.
The
SEC’s
complaint
reveals
that
Lane
and
Fraher
were
allegedly
aware
of
serious
deficiencies
in
the
bank’s
BSA/AML
compliance
program
on
several
occasions
prior
to
November
2022.
Despite
receiving
word
from
government
examiners
that
its
efforts
were
inadequate,
Silvergate
still
claimed
there
were
no
risk
factors
in
its
quarterly
or
annual
reporting.
Silvergate’s
rapid
rise
from
a
small
community
bank
to
the
digital
assets
sector’s
leading
financial
partner
was
followed
by
an
even
faster
descent.
The
bank
voluntarily
folded
under
the
pressure
of
the
crypto
sector’s
downturn
in
March
2023,
making
it
the
first
of
three
technology-tied
lenders
to
be
shuttered
during
that
period’s
“crypto
winter.”
The
loss
of
Silvergate
and
two
other
banks
(Silicon
Valley
Bank
and
Signature
Bank)
triggered
months
of
U.S.
banking
turmoil
and
left
digital
asset
companies
struggling
to
find
financial
relationships
as
crypto
fell
further
out
of
favor.
A
Silvergate
spokesperson
stated
that
the
settlements
are
part
of
the
bank’s
ongoing
efforts
to
wind
down.
The
bank
had
already
repaid
all
deposits
to
banking
customers
by
November
2023
and
ceased
banking
operations
soon
after.
Go to Source
Author: Oliver Dale
