Silvergate Under DOJ Probes: Risk of Criminal Charges Looms

• The United States Department of Justice is conducting a criminal probe into Silvergate Capital Corp.’s dealings with the bankrupt crypto firm FTX and its sister concern Alameda Research.
• The investigation comes after FTX’s collapse in 2022 resulted in over two-thirds of Silvergate’s customers withdrawing deposits totaling $8 billion, resulting in a net loss of $1 billion for the bank in the fourth quarter.
• The DoJ is looking into Silvergate’s risk management practices, among other matters, and could bring charges against the company if warranted by their findings.

DOJ Investigates Silvergate Capital Corp.

The United States Department of Justice has launched a probe into Silvergate Capital Corp. and its dealings with bankrupt crypto firm FTX and its sister concern Alameda Research. Prosecutors are looking into various aspects of the company’s operations, including its risk management practices, as part of a criminal investigation.

FTX Debacle Continues to Have Consequences

The FTX debacle of 2022 has continued to have consequences across the industry, including on certain firms in the TradFi sector. It has also incited the Department of Justice into more focused action by charging the CEOs of FTX and Alameda Research with fraudulent activities. An inside source has reported that the DoJ is now looking into the operations of Silvergate Captial Corp., which was one of the chief backers of FTX.

Silvergate Witnessed Major Losses

Over two-thirds of Silvergate Bank’s customer base withdrew deposits totaling over $8 billion after FTX collapsed, resulting in a net loss for the bank in Q4 2022 amounting to $1 billion. The company’s stock lost 88% value during that year and premarket trading saw it lose 40%, leading to drastic layoffs within Silvergate as it sought to mitigate losses incurred due to FTX’s failure.

Government Bodies Increasing Scrutiny

Silvergate has been facing increasing scrutiny from government bodies such as federal prosecutors from DoJ’s fraud section who are conducting a criminal probe into their dealings with FTX and Alameda Research. In addition, a bipartisan group senators requested details on their risk management practices associated with those businesses linked to Sam Bankman-Fried (FTX founder). This mounting judicial pressure caused FUD among investors – although no charges have been brought yet – which further weighed down performance for an already struggling banking institution.

Silvergate: A Brief Summary

Silvergate used to be a small US organization till it went public in November 2019 when it entered and became a significant player in crypto market by providing banking services for rejections by traditional service providers; however this success was short lived once their ties to FTX were revealed and resulted massive losses due to customer withdrawals when exchange collapsed amidst fraud allegations against CEO Sam Bankman-Fried