A class action lawsuit was filed against Silvergate Bank, Silvergate Capital Corporation and Silvergate CEO Alan Lane on Wednesday in the US District Court for the Southern District of California, alleging that the defendants directly aided and abetted FTX’s fraudulent activities.
According to court filings, Plaintiff Joewy Gonzalez and “all other persons in a similar position” entrusted their investments to now-bankrupt cryptocurrency exchange FTX, which promised investors that they could “keep the assets safe while increasing their value, cash them out, or trade them for assets or financial products.” the other.”
But with the collapse of FTX last month, the plaintiff and other FTX investors are unable to recover their investments, as they face “years of uncertainty and catastrophic losses.”
Silvergate, a publicly traded, federally regulated bank, maintained accounts for both FTX and its subsidiary Alameda Research, which the plaintiff alleged engaged in “direct involvement in the mixing of funds, improper transfers, and lending of customer funds.”
Silvergate Procedures is incorporated into the SBF Corporation
The lawsuit also alleges that the defendants made misleading statements, without revealing that the company’s platform lacked sufficient controls and procedures to detect cases of money laundering.
“FTX/Alameda was one of Silvergate’s most important clients, and their business operations and interests were closely intertwined. Silvergate benefited from deposits from clients holding digital assets, which grew exponentially as FTX’s business expanded,” according to the filing.
She added that “Silvergate’s actions and inactions were an integral part of Bankman Fried’s business,” as all financial dealings took place “in full view” of the La Jolla-based company.
News of a class action lawsuit against Silvergate follows Morgan Stanley’s move last week to downgrade the company’s stock rating from “equal weight” to “low weight,” sending its shares plummeting.
To add pressure on the company, a group of senators, including longtime cryptocurrency critic Elizabeth Warren, sent a letter to Silvergate CEO Alan Lane, asking him to disclose information about the bank’s relationship with FTX and Bankman-Fried entities.
The letter states, “The involvement of your bank in transferring FTX clients’ funds to Alameda reveals what appears to be a serious failure of your bank’s responsibility to monitor and report suspicious financial activity by its clients.”
Silvergate has until December 19 to respond to lawmakers.
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