- Silvergate gets lumped with FTX in a lawsuit
- Silvergate was accused of negligence and processing illegitimate transfers of customer funds
- The crypto-friendly bank pushed to liquidity due to exposure to FTX
- New lawsuits will be kept separate from FTX’s federal cases.
The plaintiffs seeking damages from the exposure to Silvergate’s collapse have all joined forces through their respective lawsuits to seek the damages they are owed.
A California judge ruled on April 19 to consolidate three investor cases against the now-defunct crypto-friendly bank Silvergate Bank and the similarly-failed cryptocurrency exchange FTX.
Northern District of California U.S. District Judge Jacqueline Scott Corley ruled to consolidate three complaints alleging Silvergate of facilitating investor fraud committed by the defunct cryptocurrency exchange FTX.
According to a report by Law360, four former investors of Silvergate Bank have filed lawsuits against the bank. These cases will proceed independently of the federal cases filed against FTX and its founder, Sam Bankman-Fried, but will be consolidated at the parties’ mutual request.
The cases laid against Silvergate Bank involve common questions of facts and law as they include the name of common defendants and arose from the same alleged course of conduct and also assert the overlapping causes of action in a way that the Silvergate cases are appropriate for Consolidating.
The names of the four defendants that filed the trio of suits in February are Nicole Keane, Golam Sakline, Matson Magleby, and Sonam Bhatia.
The plaintiffs alleged that Silvergate had a hand in FTX’s alleged misconduct against them. The actions included processing illegitimate customer funds transfers to FTX’s sister trading firm, Alameda Research.
Silvergate announced its closure in March and stated that it was a voluntary liquidation of assets and shut down operations. The bank was additionally hit with a class-action suit back in January on charges of securities law violations, while FTX collapsed and filed for bankruptcy in November 2022, with its collapse resulting in a crash in the crypto market and then going on to create liquidation issues for Silvergate, which was exposed to it.
Conclusion
Silvergate Bank is not the only crypto-friendly bank that shut down operation this year, Signature bank soon followed, and the New York state’s financial regulator reported that the collapse of the bank was caused by a run from a massive base of depositors across several businesses sectors and not just the crypto space. The bank was, however, seized by regulators in March.
The forced closure and shutdown of these banks sent shivers through the crypto space as they were two of the biggest crypto-friendly banks, and their collapse meant bad news for the crypto market.
Silvergate Bank being hit with a lawsuit points even further to that belief.
