The Securities and Exchange Commission (SEC) has filed a lawsuit against Silvergate Capital Corporation, the parent company of the now-defunct Silvergate Bank, over alleged violations of the Bank Secrecy Act (BSA).
The SEC also targets former Silvergate Bank CEO Alan Lane and former Silvergate Chief Risk Officer Kathleen Fraher for allegedly misleading investors about the bank's compliance program and its monitoring of crypto customers, including FTX.
SEC Sues Silvergate Capital Corporation
The lawsuit claimed that from November 2022 to January 2023, Silvergate, Lane, and Fraher falsely assured investors that the bank had an effective Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program and was closely monitoring its high-risk crypto customers.
However, the SEC said that Silvergate's automated transaction monitoring system failed to oversee over $1 trillion in transactions on the bank's payments platform, the Silvergate Exchange Network.
The SEC further alleged that Silvergate and its former Chief Financial Officer, Antonio Martino, misrepresented the company's financial health during a liquidity crisis and bank run following FTX's downfall.
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Silvergate Agrees to Settle SEC Charges
According to the complaint, Silvergate and Martino misrepresented the bank's losses from anticipated securities sales and falsely asserted that it was well-capitalized as of December 31, 2022.
Silvergate has decided to settle the SEC's charges, agreeing to a $50 million civil penalty and a permanent injunction without admitting or denying the allegations.
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