Silvergate Capital Corp. Resolves $63 Million Settlement with U.S. and California Regulators
Silvergate Capital Corp., the parent organization of Silvergate Bank recognized for its positive stance towards cryptocurrencies, has reached a $63 million agreement with U.S. and California regulators. The settlement addresses accusations of internal management deficiencies and deceptive disclosures to investors.
The U.S. Securities and Exchange Commission (SEC) initiated legal action against Silvergate Capital Corp., its former CEO Alan Lane, former COO Kathleen Fraher, and former CFO Antonio Martino. The SEC alleged that the bank misrepresented the efficacy of its Bank Secrecy Act/anti-money laundering program. Additionally, the Federal Reserve and California's Department of Financial Protection and Innovation (DFPI) filed charges against the California-based bank.
As part of the settlement, Silvergate, Lane, and Fraher have agreed to pay penalties without admitting or denying the SEC's allegations. Lane and Fraher will encounter a five-year prohibition from holding officer or director roles in a public company. Moreover, Silvergate will distribute $43 million to the Fed and $20 million to DFPI to address flaws in internal transaction monitoring. The SEC has imposed a $50 million fine, which may be reduced by payments to banking regulators.
Former CFO Antonio Martino refuted the accusations, claiming they were related to a specific quarter in 2022 and involved subjective decisions. The SEC's complaint pointed out that Silvergate failed to detect nearly $9 billion in questionable transfers by a major client, FTX.
A spokesperson for Silvergate highlighted that the settlements are part of the bank's systematic wind-down process initiated in early 2023, sans government aid. Previously a significant partner for cryptocurrency enterprises, Silvergate's closure amidst industry challenges was a notable event in the financial sector.
These regulatory measures against Silvergate shed light on the continuous scrutiny and compliance hurdles encountered by financial institutions involved in digital assets.
