Silvergate Bank, a California-based bank and business that provided services for cryptocurrency clients, is facing three combined lawsuits from investors accusing the bank of aiding cryptocurrency exchange FTX in fraudulently stealing their funds.
According to an article by Law360 published on April 19, US District Judge for the Northern District of California, Jacqueline Scott Corley, consolidated the three separate lawsuits against Silvergate Bank, stating that they all shared common legal and factual questions.
Four investors filed the lawsuits in February, accusing Silvergate of knowingly supporting FTX’s alleged inappropriate conduct, such as processing questionable transfers of customer funds to its sister trading firm, Alameda Research.
Meanwhile, Silvergate Bank had already disclosed plans to “voluntarily liquidate” assets and shut down operations in early March following a bank run. In addition to this, the bank was hit with a class-action suit in January for violating securities law.
The bankruptcy filing of FTX in November of last year, which precipitated a severe market crash and liquidity problems for Silvergate and several other once-leading firms, was the root of the issue.
It is worth noting that these lawsuits are separate from other federal cases against FTX and its co-founder, Sam Bankman-Fried, who is set to face a court in October this year.
Meanwhile, Tribe Capital is reportedly considering injecting new capital into the now-bankrupt cryptocurrency exchange FTX in an attempt to revive it.
NYDFS Clarifies Signature Bank’s Collapse Not Related to Crypto
Silvergate Bank is not the only financial institution to be impacted by recent difficulties in the financial markets. Other banks, including Silicon Valley Bank and Signature Bank, have also experienced issues. However, New York State’s financial regulator has made it clear that the collapse of Signature Bank was not caused by cryptocurrency, despite its friendly approach.
During a House Financial Services Committee hearing on stablecoins on April 18, New York State Department of Financial Services Superintendent, Adrienne Harris, explained that “It is a misnomer that the failure of Signature Bank was related to crypto.”
Instead, Harris noted that Signature Bank’s collapse was due to a broad-based run from depositors across various business sectors, including wholesale food vendors, fiduciaries, trust accounts, and law firms, who withdrew their funds, which caused the bank’s collapse. The bank, which was known for its crypto-friendly approach, was seized by federal regulators in March.
