Report: US Prosecutors Looking Into What Silvergate Knew of FTX

U.S. prosecutors are reportedly examining Silvergate Capital’s hosting of accounts for FTX and Alameda Research.

Bloomberg reported Thursday (Feb. 2) that the probe centers on what banks and intermediaries knew about the now-bankrupt cryptocurrency companies that have since been accused by U.S. officials of fraud.

Silvergate’s bank catered to crypto companies and served Alameda Research with an account beginning in 2018, according to the report.

The bank has not been accused of wrongdoing and the investigation is only in early stages, the report said.

The report comes about two months after U.S. Sens. Elizabeth Warren, D-Mass., and Tina Smith, D-Minn., asked three federal agencies how they assess the banking system’s exposure to crypto risks.

In letters sent Dec. 7 to the heads of the Federal Reserve System, the Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency, the senators highlighted reports that Silvergate Capital, Moonstone Bank, Deltec Bank, Signature Bank and other banks courted crypto customers and are now experiencing increased volatility.

They asked the agency heads if they plan to review crypto firms’ relationships with banks and to describe how they evaluate banks’ relationships with crypto firms and engagement in crypto-related activities.

A day earlier, on Dec. 5, Silvergate Capital released a public letter in which the bank’s CEO, Alan Lane, said that the company conducted extensive due diligence on FTX, Alameda Research and other FTX-related entities.

“When Silvergate received payments directed to Alameda Research and credited it to the account of the same name, this was consistent with the instructions from the sender of the wire and industry practice,” Lane wrote in the letter. “And, as I’ve noted previously, if we detect activity that is unexpected or potentially concerning in any account, we conduct an investigation and, when required, confidentially file a suspicious activity report in accordance with federal regulation.”

In January, Silvergate said the crypto industry’s continued downturn had led to a $1 billion loss.

In response, the company said it was cutting jobs and taking other actions to stay resilient.

“During the fourth quarter of 2022, the digital asset industry experienced a transformational shift, with significant over-leverage in the industry leading to several high-profile bankruptcies,” Silvergate Capital said at the time. “These dynamics created a crisis of confidence across the ecosystem and led many industry participants to shift to a ‘risk off’ position across digital asset trading platforms.”