Silvergate Bank Sued for Inadequate Compliance Program
Silvergate Bank has been charged by the Securities and Exchange Commission (SEC) for misleading investors about the effectiveness of its Anti-Money Laundering (AML) compliance program.
The SEC charged three former executives including former Silvergate Bank CEO Alan Lane, former Chief Risk Officer Kathleen Fraher, and former Chief Financial Officer Antonio Martino. All parties charged, aside from Martino, have agreed to settle the SEC’s charges.
In the SEC’s complaint, from November 2022 to January 2023, Silvergate executives falsely assured investors that Silvergate had an effective compliance program and continuously monitored high-risk crypto customers, such as FTX which went bankrupt in 2022.
The statements were part of an effort to counter public speculation that FTX had used Silvergate accounts to facilitate its misconduct.
In March, it emerged that FTX users were suing the now-defunct Silvergate by claiming it abetted FTX and its affiliated trading firm Alameda Research to commit a historic fraud. On March 20, Judge Ruth Bermudez Montenegro of a San Diego federal court filed an order denying Silvergate’s motion to dismiss the case.
However, the SEC alleges that Silvergate’s automated transaction monitoring system failed to monitor more than $1 trillion in customer transactions on the Silvergate Exchange Network.
“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, Lane, and Fraher fell not only woefully, but also fraudulently, short in that regard,” said Gurbir Grewal, director of the SEC’s Division of Enforcement.
He emphasized that rather than disclosing serious deficiencies in its compliance programs
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