While the current topic of investigation into Silvergate Bank seems speculative at this point, there is a deep link between the financial institution and FTX.
Shares of US financial services giant Silvergate Capital Corp (NYSE: SI) plunged 13.16% to $18.21 in pre-market after reports emerged that the company’s banking unit is under investigation. by the United States Department of Justice (DoJ).
As reported Per Bloomberg, the US Department of Justice’s fraud unit is in charge of the investigations and regulators are looking to explore whether the company had any fraudulent relationship with the bankrupt derivatives exchange FTX. According to the report, no charges have been filed against the company at this time.
Specifically, regulators are investigating the hosting of accounts linked to the businesses of Sam Bankman-Fried. According to sources who asked not to be named, the investigation is still in its early stages and charges are not likely to be filed against the company at this time.
As a cryptocurrency-based bank, Silvergate has experienced significant hurdles due to the crypto winter. With declining revenue and general devaluation, the pressures on the company are increasing and the news of the investigation is bad optics for the company. As one of the companies with the largest exposure to FTX, the bank posted a $1 billion loss in the prior quarter.
Silvergate also collapsed under the weight of its high cost of operations in the previous quarter, laying off as many as 40% of its staff.
As the current investigation progresses, the information prosecutors will seek from Silvergate will relate to what it knows about the fraud scheme allegedly spread by FTX to defraud investors. The FTX implosion and operational management of the platform appeared as a coordinated scheme that took a bad turn early.
Silvergate bank and the FTX connection
While the current topic of investigation into Silvergate Bank seems speculative at this point, there is a deep link between the financial institution and FTX. Alameda Research, FTX’s sister company, opened an account with the bank in 2018. At that time, FTX’s main exchange had not been established.
With the collapse of both firms, Silvergate Bank has revealed that it followed due diligence at the time it incorporated them. The bank also said that it continued to monitor the exchange’s activities after the initial listing.
One major strong endorsement that Silvergate has relied on since FTX collapsed is that it adheres to central banking laws. Silvergate is under constant audit by independent auditors and regulators and no wrongdoing has been discovered so far.
Despite the exposure to FTX, the bank said it has about $4.6 billion in cash and cash equivalents as of the end of 2022. Depending on how the Justice Department’s investigation into the relationship between Silvergate Bank and FTX turns out, the company should do everything possible. can restore investor confidence.
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Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about the real-life applications of blockchain technology and innovations to drive mainstream acceptance and global integration of emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain-based sites and media. Benjamin Godfrey is a lover of sports and agriculture.
