- The Federal Reserve and California regulators found major deficiencies in Silvergate Bank’s anti-money laundering practices.
- Former Chief Financial Officer Antonio Martino has chosen to contest the SEC’s allegations, aiming to prove the regulator’s overreach in court.
The owner of defunct crypto lender Silvergate Bank has agreed to a $63 million settlement with federal and state regulators over compliance failures, marking the first federal enforcement action against entities involved in 2023’s bank collapses, Reuters reported. This resolution highlights significant deficiencies in the bank’s anti-money laundering practices and reportedly misleading statements made by its top executives.
The Federal Reserve and California regulators identified critical deficiencies in Silvergate Bank’s compliance with anti-money laundering laws. Concurrently, the US Securities and Exchange Commission (SEC) accused the bank and its executives of making misleading statements to investors.
The firm’s former Chief Executive Officer Alan Lane and former Chief Risk Officer Kathleen Fraher settled with the SEC, agreeing to permanent injunctions, five-year officer-and-director bars, and civil penalties amounting to $1 million and $250,000, respectively.
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Executives’ Response And Charges
Despite the settlement, former Chief Financial Officer Antonio Martino chose to contest the SEC’s allegations. The SEC accused Martino of misleading investors about losses from expected securities sales after the collapse of the crypto exchange FTX. Martino’s lawyer issued a statement rejecting the SEC’s claims and expressing confidence in proving their overreach in court.
La Jolla-based Silvergate Bank, primarily serving cryptocurrency clients, announced in March 2023 that it would wind down operations following significant losses post-FTX collapse and a broader downturn in the digital asset market. This announcement came amid a wave of bank failures in 2023, which included the collapse of Silicon Valley Bank. Silvergate faced severe liquidity issues, exacerbated by depositors withdrawing over $8 billion, forcing the bank to sell debt securities at a loss.
Silvergate Capital, while neither admitting nor denying the SEC charges, confirmed that all customer deposits had been repaid. The spokesperson stated that the settlements would facilitate the surrender of Silvergate’s bank charter, marking a critical step in the bank’s orderly liquidation process.
Silvergate Capital agreed to pay $20 million to the California Department of Financial Protection and Innovation and $43 million to the Federal Reserve. Additionally, the SEC imposed penalties of $50 million, offset by Silvergate’s payments to the Fed and DFPI.
