Silvergate Capital, known for its cryptocurrency-friendly policies, is facing pressure from a group of senators from both the Democratic and Republican parties over its ties to the FTX exchange.
According to Valks and quoted by Bein Crypto, this group, which includes names such as Elizabeth Warren, Roger Marshall and John Kennedy, sent a letter to Silvergate Bank and asked this company about They asked about the financial crimes of the FTX exchange. They called Silvergate’s previous responses on the matter “evasive and incomplete.”
The senators have accused Silvergate of refusing to fully answer their questions in December, citing a legal restriction on disclosing “confidential regulatory information.” They also criticized this justification and stated that both Congress and the public deserve a clear answer to Silvergate’s role in the collapse of the FTX exchange. Silvergate Bank turned to a $4.3 billion loan from the Federal Home Loan Program to finance massive withdrawal requests from its customers following the collapse of the FTX exchange.
In response to the senators’ initial letter, Silvergate said it had conducted due diligence on FTX and related companies, which was confirmed by annual Federal Reserve audits and reviews by independent auditors. The bank also said it was investigating transactions involving accounts attributed to FTX and Alameda Research.
However, Elizabeth Warren, Roger Marshall, and John Kennedy have accused Silvergate of omitting key information in its earlier response.
In the last letter of the senators, they asked Silvergate to answer the question whether they knew about the transfer of funds deposited by FTX exchange customers to Alameda’s account or not and whether this issue did not raise their suspicions. Senate representatives also raised questions about the process of conducting investigations by Silvergate, the results of Silvergate’s audit, and how the bank used the loan received from the Federal Home Loan Program.
Sam Bankman-Fried, the former CEO of the FTX exchange and other senior executives of the company, have been accused of committing a billion-dollar fraud by transferring the funds of FTX exchange customers to Alameda’s account. Some of these funds have been transferred through Silvergate bank accounts.
A Silvergate Bank representative stated that the company has a comprehensive compliance and risk management program and has conducted due diligence on FTX and Alameda Research. However, Sultan Meghji, the former chief innovation officer of the Federal Deposit Insurance Corporation, confirmed that banks cannot disclose confidential regulatory information and that Congress should work with banking regulators to obtain that information.
The senators have given Silvergate a February 13 deadline to respond to their questions. The outcome of this investigation will provide important data on the extent of Silvergate’s liability for the transfer of FTX customers’ funds.
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