An account with Silvergate Capital may have played a key role in FTX’s collapse this November, according to a Dec. 20 report from the Wall Street Journal.
The newspaper cited three U.S. senators who said that an account at Silvergate “appears to be at the center” of FTX’s collapse. Those senators also said that Silvergate is reviewing transactions between FTX and Alameda Research.
Those senators went on to say that they “didn’t get too much in the way of real answers” when they asked the bank about specific customers and regulatory flags. Confidentiality rules allowed the bank to keep that information private.
Two Republican senators, John Kennedy and Roger Marshall, provided the information in today’s report. Democratic Senator Elizabeth Warren, well known for her harsh stance toward cryptocurrency, was also involved in disclosing the information.
Silvergate’s FTX-related findings will presumably affect ongoing hearings related to FTX. However, the news could also affect public perception of Silvergate itself, which has been criticized due to its reliance on the collapsed exchange. In November, Silvergate admitted that it has exposure to FTX — while simultaneously attempting to minimize that fact by stating that its exposure amounts to less than 10% of user deposits.
Silvergate attempted to further reassure customers on Dec. 6 by stating that it did due diligence on FTX and Alameda. The bank further defended itself and its risk monitoring systems on Monday, Dec. 19, according to the Wall Street Journal.
Those assurances do not seem to have comforted investors, who have filed multiple class action lawsuits against the company.
One class action suit was filed against Silvergate today on behalf of investors who purchased the company’s securities. The lawsuit mentions a Nov. 17 newsletter that described Silvergate’s exposure to FTX and seemingly caused the value of Silvergate stock to fall.
The same lawsuit also mentions an unrelated issue: Silvergate’s alleged role in handling laundered money originating from smugglers and drug traffickers in South America. That news similarly caused the value of the company’s stock to decline.
Silvergate is known for providing extensive services to blockchain and fintech companies. It claims to serve over 750 cryptocurrency exchanges and related companies.