Silvergate is facing a class-action lawsuit over its dealings with FTX

Key takeaways:

  • In the complaint, Silvergate is charged with contributing to FTX’s demise.
  • Joewy Gonzalez initiated the lawsuit on behalf of himself and others who shared his circumstances.

In a class-action complaint filed in a US court, Silvergate Bank is accused of having a significant hand in the Sam Bankman-FTX Fried’s and Alameda Research fraud.

Joewy Gonzalez of Revere, Massachusetts, as well as “all others similarly situated” are the plaintiffs in this case. They contend that the crypto bank is responsible for the alleged fraud at the defunct FTX exchange since it kept accounts for the latter and its sister trading company Alameda Research, facilitating a breach of fiduciary duty.

The platform assured investors that they could “securely keep assets as they acquire value, withdraw cash, or exchange them for other assets,” thus the defendant allegedly put his funds in cryptocurrencies through the FTX exchange. Girard Sharp and Hartley LLP is the plaintiff’s legal counsel.

Three US senators issued a letter to Silvergate on December 6 asking for information on the company’s involvement in the billions of dollars in losses during the FTX collapse. Senators John Kennedy, Roger Marshall, and Elizabeth Warren urged Lane to elaborate on the company’s connection to FTX.

Earlier this month, a bipartisan group of senators expressed their desire for further information from Silvergate regarding its financial health and control over the FTX and Alameda funds.

At the end of September, 90 percent of Silvergate’s total deposit base came from crypto businesses that operate in a highly unpredictable market, demonstrating the bank’s focus on serving clients with digital assets. 

At least two of Silvergate’s clients who use digital assets have filed for bankruptcy in the past month: FTX and its affiliates and BlockFi. However, Silvergate’s exposure to the cryptocurrency market goes beyond its deposits.

One of the few U.S. banks that permits consumers to transfer dollars or other fiat currencies onto cryptocurrency exchanges is Silvergate. According to a recent FTX bankruptcy proceedings, FTX and associated firms, such as Alameda Research, its hedge fund and proprietary trading company, maintained 20 distinct accounts at Silvergate. A complaint filed against Bankman-Fried and his top colleagues claims that in recent years, billions of dollars in wire transfers trickled via Silvergate to FTX Group.

Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!


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