• The US Department of Justice is investigating Silvergate Capital Corp and its dealings with FTX and Alameda Research.
• Silvergate has suffered severe financial losses due to the FTX debacle, including a $1 billion loss in the last quarter of 2022.
• There is a possibility that Silvergate could face charges from federal prosecutors as they continue their criminal probe into the bank’s activities.
Department of Justice Probes Silvergate Capital Corp
The United States Department of Justice has launched an investigation into Silvergate Capital Corp., parent company of crypto-focused Silvergate Bank, and its dealings with bankrupt crypto firm FTX and its sister concern Alameda Research.
FTX Debacle Causes Financial Losses for Silvergate
When FTX collapsed, over two-thirds of Silvergate’s customer base withdrew deposits totaling over $8 billion, resulting in a net loss of $1 billion for the bank in the fourth quarter of 2022. The company had to resort to drastic layoffs to mitigate damages caused by the incident, which also caused its shares to lose 88% value in 2022 and 40% in premarket trading.
DoJ Criminal Probe Into SilverGate’s Activities
The collapse of the FTX ecosystem has led federal prosecutors in the DoJ’s fraud section to conduct a criminal probe into SilverGate’s operations, especially those related to FTX and Alameda Research. This has caused increasing scrutiny from government bodies and policymakers, with a bipartisan group of senators even requesting details on risk management practices and information on dealings with FTX.
Possibility Of Charges Against SilverGate
The increasing judicial scrutiny has weighed down on investor sentiment towards the bank due to anti-crypto sentiments among government departments raising the possibility that charges may be brought against it at some point.
Before going public in November 2019, SilverGate was just a small US organization but soon entered the crypto market becoming one of the most notable banks for crypto companies that were turned down by traditional banking service providers. Its shares reached their peak before suffering significant losses due to its involvement with FTX.