The lawsuit wants to hold the bank accountable for supporting the failed cryptocurrency business
A federal judge in San Diego ruled that Silvergate Bank must face a class-action lawsuit from former FTX users who accuse the now-defunct cryptocurrency institution and its trading firm, Alameda Research, of aiding fraud at the exchange.
The March 20 ruling handed down by Judge Ruth Bermudez Montenegro rejected a June motion to dismiss the case, finding that the class group was accurate in alleging Silvergate was aware of the FTX fraud and unjustly benefitted at FTX users’ expense.
The court determined that Silvergate Bank owed a duty of care to FTX customers as its Silvergate Exchange Network (SEN), which aided in moving funds to crypto exchanges, benefitted FTX customers and “that a crypto exchange like FTX was virtually impossible before the SEN.”
Silvergate supported FTX and Alameda and “processed transfers and accepted deposits that sent FTX customer money to Alameda,” wrote the judge. “FTX did not initially have a bank account, so customers were directed to wire money to Alameda’s account.”
“Silvergate had a strong incentive to continue accepting FTX and Alameda customer deposits and executing transfers because Silvergate’s business centered around the adoption of the FTX exchange platform and app,” reads the order.
Silvergate profited from translation fees and interest deposited into FTX-related accounts. The order states that Silvergate’s income before FTX was $7.6 million annually and rose to $75.5 million after banking the exchange.
The court ruling comes more than a year after the suits were filed in February 2023. Silvergate Bank failed in March 2023, a few months after FTX filed for bankruptcy in November 2022.
Former FTX CEO Sam Bankman-Fried was found guilty last November on seven fraud and money laundering charges and will be sentenced on March 28.
