Silvergate will have to pay $63 million for its failures
Silvergate Capital Corporation, the parent company of the now-defunct Silvergate Bank, has agreed to a $63 million settlement with US and California regulators to resolve charges related to its handling of anti-money laundering (AML) and bank secrecy compliance programs.
The Federal Reserve will receive $43 million, while the California Department of Financial Protection and Innovation (DFPI) will be awarded $20 million. The settlement comes on the heels of a lawsuit filed by the Securities and Exchange Commission (SEC) in July, accusing Silvergate of securities fraud and misleading investors about its financial condition and compliance measures.
According to the SEC, Silvergate actively deceived investors about the effectiveness of its AML and bank secrecy programs, particularly in the wake of the FTX collapse. Despite receiving warnings from examiners about compliance deficiencies, the company continued to misrepresent its financial health and risk management practices in its public filings.
“Public companies must be truthful to their investors,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Instead of informing investors about serious deficiencies in their compliance programs following the collapse of FTX, one of Silvergate’s largest banking customers, the company doubled down and continued to mislead investors.”
The collapse of Silvergate Bank last year, following a bank run of over $42 billion, sent shockwaves through the crypto industry. The company’s failure, along with that of Signature Bank, highlighted the vulnerabilities of crypto-friendly banks and the challenges of regulating the rapidly evolving digital asset space.
The SEC’s action against Silvergate is part of a broader crackdown on crypto-related misconduct. Regulators are increasingly scrutinizing the industry for compliance failures, fraud, and market manipulation. As the crypto market matures, it is likely that we will see more enforcement actions and stricter regulations in the coming years.
