- Silvergate faces DoJ investigation over its involvement with FTX and Alameda Research.
- The crypto bank is not being charged. However, prosecutors believe there are details and information about the fraudulent scheme of Sam Bankman-Fried.
- Silvergate has been on the hot seat since the collapse of FTX and its affiliates.
Silvergate has been under heat from legal actors and the crypto community since the crash of FTX and its sister company, Alameda Research.
Although the crypto bank is not being charged for any illicit activities, the Department of Justice is curious as to how much information Silvergate was privy to about the fraudulent companies and how deep did was its participation with FTX and Alameda.
According to a February 3 report by Bloomberg, the DOJ prosecutors are probing the crypto-friendly bank without any charges as they investigate Silvergate’s hosting of accounts linked with Sam Bankman-Fried’s companies.
The crypto bank was one of the companies heavily affected by the crash of FTX and its affiliated company in November 2022, reporting a loss of $1 billion in its Q4 report. The California-based crypto-friendly bank employed all methods under its sleeves to avoid falling under like FTX and its affiliated companies.
Due to the crash of FTX and the severe crypto winter of 2022, Silvergate had no choice but to lay off 40% of its staff and borrow billions of dollars to avoid a liquidity crisis following the FTX collapse.
According to people familiar with the matter, the US prosecutors in the DoJ fraud unit began the probe a few weeks ago, centered around unsolved questions running through the prosecutors’ minds. Questions such as what did the banks and intermediaries working with FTX know, and how long have they kept the information to themselves?
What is the basis for the probe?
The DoJ believed that the fraudulent scheme that FTX founder and former CEO Sam Bankman-Fried and his cohorts executed was planned years ago. SBF created FTX in 2018, but before then, its affiliate company, Alameda Research, had been in business with Silvergate.
According to Silvergate, the crypto bank claimed to have performed due diligence on the firms during the onboarding procedure and through ongoing monitoring. Silvergate has been a massive supporter of the cryptocurrency industry, which became the go-to bank for all crypto dealings.
However, since the fraudulent scheme of Sam Bankman-Fried and his associates, Silvergate has been heavily criticized without remorse by the crypto community, FTX victims, and the legal world.
On January 27, the crypto bank announced that it would pause its dividends. Although the company has not been charged for any wrongdoing, it still faces a class action suit from victims of the FTX fraud scheme who claimed the bank was not forthcoming about its financial controls.
Conclusion
Silvergate, a crypto-friendly bank, has been probed by the United States of America’s Department of Justice. Though the bank is not being charged yet, the prosecutors are curious about what roles Silvergate played in Sam Bankman-Fried’s fraudulent scheme and how much information it had access to.
