The Investigation into Silvergate Bank
In a dramatic twist in the cryptocurrency saga, Silvergate Bank is now facing scrutiny from the United States Department of Justice’s fraud unit. This investigation centers around the bank’s connections with the infamous FTX exchange, which infamously declared bankruptcy late last year. Initially reported by Bloomberg, the inquiry aims to uncover the extent of Silvergate’s relationships with disgraced FTX CEO Sam Bankman-Fried and the associated Alameda Research.
What Silvergate Bank Faces
Importantly, as of now, Silvergate Bank is not facing legal charges. However, the feds are hoping to trace the paper trails and money flows that could shed light on these connections. This investigation arrives at a tumultuous time for the California-based bank, which suffered a staggering $1 billion loss in the previous quarter due to the FTX collapse.
Impact of the FTX Collapse
Marching to the beat of a crashing crypto empire, Silvergate’s response included the heartbreaking decision to trim its workforce by 40%. With liquidity concerns snapping at its heels, the bank sought billions in loans to stave off a potential banking crisis. That’s right, billions—silver linings had apparently cast a long shadow.
Compliance in the Spotlight
On the record, Silvergate claims that it conducted due diligence when Alameda opened an account back in 2018—well before FTX entered the spotlight. They also insist that their compliance and risk management programs are extensive and robust. Funny how those phrases always seem to pop up in the wake of investigations, right?
Crypto Community Reactions
The crypto landscape is never dull, and traders are feeling the jitters. Josh Rager, a well-known crypto trader, humorously pointed out the possible ramifications a DOJ investigation could have on other crypto exchanges linked to Silvergate. In the realm of cryptocurrencies, the term “FUD” (Fear, Uncertainty, Doubt) is almost a sport, and it’s safe to say this news will feed that fire.
The Financial Toll on Silvergate
To add salt to the wound, just days before the investigation went public, Silvergate chose to suspend its dividends, citing “recent volatility in the digital asset industry.” Going from a high of $220 in November 2021, its stock price has plummeted by a shocking 92%, dropping to about $17.14 in after-hours trading. Oof, talk about a rough ride!
What’s Next for Silvergate?
As the world watches and waits, it’s clear that Silvergate’s fortunes are ebbing. Will they manage to turn the ship around, or will this investigation steer them further into choppy waters? Only time will tell. Cointelegraph reached out to Silvergate for more insight, but as of our publication, we’ve heard crickets.
