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.
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.
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.
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Source: https://decrypt.co/120482/silvergate-bank-ftx-justice-department-senate
