Defunct California-based bank Silvergate will pay $63 million to settle civil charges from federal and state regulators relating to its relationship with collapsed cryptocurrency exchange FTX.
The penalties include amounts assessed by the US Securities and Exchange Commission (SEC), the Federal Reserve, and the California Department of Financial Protection and Innovation (DFPI).
Silvergate and three executives were accused by the SEC of misleading investors about the bank's compliance with legal regulations and monitoring of clients, including FTX.
FTX filed for bankruptcy in November 2022, and its founder, Sam Bankman-Fried, was convicted of fraud and sentenced to 25 years in prison.
On Monday, Gurbir Grewal, the SEC’s director of enforcement, stated: "At all times, but especially during moments of crises, public companies and their officers must speak truthfully to the investing public.
“Here, we allege that Silvergate, (former CEO Alan) Lane and (former chief risk officer Kathleen) Fraher fell not only woefully, but also fraudulently, short in that regard.
“Rather than coming clean to investors about serious deficiencies in its compliance programs in the wake of the collapse of FTX, one of Silvergate’s largest banking customers, they doubled down in a way that misled investors about the soundness of the programs.”
Silvergate allegedly failed to detect nearly $9 billion in suspicious transfers among FTX and its related entities, said Grewal.
Silvergate was one of the numerous regional US banks to collapse during the 2023 mini-crisis that also claimed the scalps of Silicon Valley Bank and Signature Bank.
Former chief finance officer Antonio Martino, who is also charged, plans to contest the allegations, according to the Financial Times.
"The allegations made by the SEC are unfounded and irresponsible, and I look forward to presenting my case in court and clearing my name," said Martino.