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The crypto-friendly bank Silvergate Capital Corporation has settled with the SEC, Federal Reserve and California Department of Financial Protection and Innovation over charges stemming from a failure to detect nearly $9B in suspicious transfers by FTX and its network.
What's the scoop?
- SEC Lawsuit: The SEC sued Silvergate, its CEO Alan Lane, former COO Kathleen Fraher, and former CFO Antonio Martino, accusing them of lying about the bank's anti-money laundering (AML) procedures.
- Inadequate Compliance: The SEC stated that Silvergate's Bank Secrecy Act (BSA) and AML compliance programs were inadequate, specifically citing the failure to monitor the Silvergate Exchange Network (SEN), which facilitated $1T in transactions without proper oversight.
- $63M Settlement: Silvergate, Lane, and Fraher agreed to settle with the SEC, with Silvergate paying $50M in fines, Lane $1M, and Fraher $250K. Martino did not agree to settle. The Federal Reserve Board and the California Department of Financial Protection and Innovation also separately settled charges against Silvergate.
Bankless Take
These latest developments for Silvergate show that FTX is still casting a shadow. That being said, the timing of the suit, following the SEC’s suit against Consensys last week, prompts the feeling of it being part of a larger campaign against our industry. Crypto-friendly banks have especially been hit hard, with few options given the U.S.’s concerted efforts to limit crypto’s access to banking services — an operation known as “Chokepoint 2.0.” While Silvergate is dead and gone, this most recent action does not portray an agency looking to help the industry move forward but rather one focused on punishing alleged crimes of the past.
I’m hearing examples of companies in the crypto space being debanked by US banks who are caving to political pressure from the left.
— Senator Bill Hagerty (@SenatorHagerty) February 17, 2023
If Operation Choke Point taught us anything, it’s that under no circumstances should banks be used as partisan tools to kill legal businesses.
