Silvergate Under DOJ Investigation: Could Face Charges Over FTX Debacle

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  • The US Department of Justice has launched an investigation into Silvergate Capital Corp. The probe is centered on the firm’s dealings with bankrupt crypto firm FTX and its sister concern Alameda Research.
  • Silvergate Bank was one of the main backers of FTX, resulting in a net loss of $1 billion after customers withdrew deposits totaling over $8 billion.
  • The DoJ is conducting a criminal probe into Silvergate’s operations, including its risk management practices and dealings with FTX and Alameda Research.

Background: Silvergate Capital Corp. Investigation

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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 have charged the CEOs of both companies with fraudulent activities, leading to a deeper investigation by DoJ into Silvergate’s operations.

Consequences for Silvergate Bank

Silvergate Bank, which was one of the chief backers of FTX, witnessed over two-thirds of its customer base withdrawing deposits of over $8 billion after the crypto exchange collapsed. This resulted in a net loss of $1 billion for the bank in the fourth and final quarter of 2022. Additionally, shares lost 88% value in 2022, down 40% premarket trading, leading to drastic layoffs as part payment damage control measures had to be taken by the bank.

Department Of Justice Criminal Probe

Due to federal prosecutors from DoJ fraud section being now looking into the operations closely, it is increasingly becoming possible that charges could be brought against Silvergate for their involvement with FTX and Alameda Research. A bipartisan group of United States senators have also requested details from them regarding their risk management practices linked to these two entities.

Silvergate Background

Before entering the crypto market and becoming a significant feature as a bank for crypto companies that were turned down by traditional banking service providers, Silvergate used to be a small US organization till it went public in November 2019.

Conclusion

Although no charges have been brought against Silvergate yet, that eventuality is highly likely due to current environment conditions and anti-crypto sentiments among most U.S government departments towards such firms . As such , it remains important for investors to stay vigilant when dealing with such businesses .