Silvergate Capital Corp., the parent company of the crypto-friendly bank which collapsed in 2023, has agreed to settle with United States and California regulators over allegations of internal management failings and the disclosure of bad information to investors.
Silvergate Bank Misled And Misinformed Customers
Notably, the United States Securities and Exchange Commission (SEC) sued Silvergate Bank and some of its former executives recently for securities fraud. In the filing, the regulator noted that the crypto-friendly bank failed to meet up with certain requirements including the Bank Secrecy Act and Anti-money Laundering (AML) regulations.
Much more, it allegedly misled its shareholders and the public by making them believe that it met the rules.
The SEC has reasons to believe that Silvergate’s lackadaisical attitude towards AML rules made it difficult for the bank to spot FTX’s $9 billion worth of transfers. A group of examiners from the Bank Secrecy Act initially flagged the actions of the bank but Silvergate was quick to say there were no risks at the time.
Alan Lane, Silvergate’s former CEO, Kathleen Fraher, its former COO and former CFO Antonio Martino, were all implicated for not monitoring suspicious activities.
Terms of Silvergate Bank’s Settlement With SEC
As a result of these flaws, the firm and its executives agreed to pay $63 million to SEC, California Department of Financial Protection and Innovation, and the Federal Reserve. Silvergate agreed to pay $50 million in fines while Lane and Fraher agreed to pay $1 million and $250,000, respectively. Martino, on the other hand, did not agree to any settlement with the regulators.
For context, $43 million will go to the Feds while the remaining $20 million is for the state regulators.
In addition to Fraher and Lane’s punishment, there is a five-year ban preventing them from acting as officers of public companies. Though the regulators have agreed on settlement terms with Silvergate Bank and two of its former executives, the agreement is still subject to approval from the court.
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