Silvergate agrees to pay 63 million to settle antimoney laundering violations
Silvergate Capital Corp. has reached a settlement of $63 million with regulators in the U.S. and California. The settlement comes after the Securities and Exchange Commission (SEC) filed a lawsuit against Silvergate and its former executives, accusing them of misleading investors about the effectiveness of the bank’s anti-money laundering program.
According to the SEC’s complaint, Silvergate failed to detect approximately $9 billion in suspicious transfers made by FTX, one of its major customers. The regulators allege that the bank did not properly monitor its Silvergate Exchange Network (SEN) during 2021 and 2022, which is a key product for transferring funds for crypto asset customers.
In addition to the SEC’s charges, the Federal Reserve and California’s Department of Financial Protection and Innovation (DFPI) also brought similar allegations against the bank. As part of the settlement, Silvergate will pay $43 million to the Federal Reserve and $20 million to the DFPI. The SEC imposed its own fine of $50 million, which may be offset by the payments to the banking regulators.
Former CEO Alan Lane and former COO Kathleen Fraher have settled with the SEC, agreeing to pay penalties and accepting a five-year ban on serving as officers or directors of a public company. However, former CFO Antonio Martino has denied the charges.
The SEC’s complaint reveals that Lane and Fraher were allegedly aware of deficiencies in the bank’s anti-money laundering program prior to November 2022. Despite this knowledge, the bank claimed in its reporting that there were no risk factors.
Silvergate Bank, the crypto-friendly bank that was the parent company of Silvergate Capital Corp., voluntarily liquidated in March 2023 following the downturn in the crypto industry. Its closure, along with the closure of two other technology-tied banks, caused banking turmoil and made it difficult for digital asset companies to find financial relationships.
A spokesperson for Silvergate stated that the settlements are part of the bank’s ongoing wind-down efforts. The bank had already repaid all deposits to customers by November 2023 and ceased banking operations shortly after.
