Silvergate Bank Faces Legal Heat Over Alleged FTX Fraud Involvement

What’s Cooking at Silvergate Bank?

It seems like Silvergate Bank and its CEO, Alan Lane, have found themselves at the center of a legal maelstrom. A proposed class-action lawsuit has emerged, accusing Lane and the bank of being complicit in a notorious fraud scheme linked to none other than Sam Bankman-Fried (SBF), the infamous figure behind FTX and Alameda Research. Now, that’s a headline nobody wants to wake up to!

The Allegations Unveiled

The lawsuit, filed in the United States District Court for the Northern District of California on February 14, was initiated by Soham Bhatia, a user from San Francisco who lost access to about $20,000 in crypto when FTX crashed like a toddler falling off a swing. Bhatia claims that Silvergate and Lane were fully aware of the illicit use of FTX customer funds by Alameda Research, and rather than sounding an alarm, they chose to keep mum and hide FTX’s “true nature” from users. Just what you need: a bank that won’t call out fraud while it’s happening.

The Heart of the Lawsuit

The heart of the allegations rests on claims that Silvergate and Lane “aided, abetted, encouraged, and substantially assisted” SBF in defrauding Bhatia and other victims. You’d think that’s enough to warrant a side-eye, right? Apparently, according to the suit, these defendants were well aware their actions—or lack thereof—were like greasing the wheels of a multi-million dollar fraud machine.

Shorting Silvergate

Adding salt to the wound, Silvergate is currently the most shorted stock on Wall Street, with about 73% of its float taken up by bets against it. Yikes! It’s not a good look when your company is the favorite punching bag in the stock market. Looks like folks are taking a wild guess that things are only going to get messier.

Previous Legal Struggles

This is not Silvergate’s first dance with litigation. Just two months prior, Joewy Gonzalez filed a similar class-action suit claiming that Silvergate had a hand in facilitating FTX’s grand investment fraud. It’s like trying to keep tabs on a bad reality show—there’s always another episode around the corner!

Silvergate’s Response?

As of now, Cointelegraph has reached out to Silvergate for a statement on these serious allegations, but no word has come back yet. Perhaps they’re trying to figure out how to spin this into a PR triumph? Who knows? Either way, rest assured, this legal saga is far from over.