Is Crypto Bank in Cahoots with FTX? Congress Questions Silvergate Procedures, Lawmakers to Push for Stricter Digital Asset Anti-Money Laundering Legislation

Senators Elizabeth Warren and Roger Marshall have introduced legislation calling for the Financial Crimes Enforcement Network (FinCEN) to issue guidance on digital assets to strengthen anti-money laundering rules in the United States. Following the collapse of the FTX incident, Silvergate, which serves as the deposit bank for FTX and Alameda Research, was also contacted by the senators to explain whether they have adequate controls in place when processing transfer transactions and to report such transactions to FinCEN.

Questions Raised About Silvergate Bank's Involvement Following FTX Bankruptcy

A group of senators led by Elizabeth Warren recently wrote to Alan Lane, the CEO of the crypto-friendly bank Silvergate, seeking information on Silvergate's dealings with FTX and SBF following the bankruptcy of FTX and Alameda. The senators requested details on how Silvergate assisted in transferring customer funds from FTX to Alameda Research, whether Silvergate reported such transactions to the Financial Crimes Enforcement Network (FinCEN), and the reasons behind the departure of former risk officer Tyler Pearson. Silvergate has been asked to respond to these inquiries by December 19th.

Silvergate Bank, a California-chartered bank, has been serving digital asset clients since its inception in 2013 and counts FTX, Gemini, and Coinbase among its clients. With a unique niche market, the bank quickly rose in the industry, transitioning from a regional bank to a publicly traded company over the past decade. Its stock price, which went public at $13 in November 2019, reached a historical high of $219 in November 2021, but has since dropped to $18.

As the deposit bank for FTX and Alameda Research, Silvergate was heavily impacted following the collapse of FTX. The bank and its executives are accused of being complicit in the fraudulent losses from FTX's demise, as Silvergate allegedly allowed FTX to transfer customer deposits to Alameda Research either intentionally or negligently.

CEO Alan Lane swiftly released a letter assuring shareholders that they have conducted diligent investigations, risk management, and reserve preparations. He emphasized that customers can access their USD deposits at any time, and their SEN network connecting fiat and crypto has remained operational. Silvergate also disclosed its exposure to FTX, with digital asset customer deposits totaling $11.9 billion as of September 30, 2022, of which FTX accounted for less than 10%.