New Lawsuit Accuses Silvergate Bank of Assisting SBF And FTX Fraud

Updated: 16 February 2023

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What – The legal case involving the co-founder and former CEO of FTX, Sam Bankman-Fried (SBF), is still ongoing.
Why – In a new development, another class action linked to the crypto exchange and SBF has emerged.
What Next – The new lawsuit implicates Silvergate Bank for aiding and abetting the FTX and SBF fraud.

More twists are emerging from the ongoing FTX investigations and the bankruptcy proceedings.

Silvergate Bank And Its CEO Accused Of Aiding And Abetting Fraud

A new proposed class action alleges that Silvergate and its CEO, Alan Lane assisted SBF and his two companies, FTX and Alameda Research, in a fraud. The lawsuit noted that the fraudulent scheme ran into billions of dollars.

The lawsuit was filed on February 14 in the United State District Court of the Northern District of California. The plaintiff, Soham Bhatia, an FTX user based in San Francisco, initiated the case using 14 lawyers as representatives. Bhatia lost about $20,000 in crypto assets as the FTX crypto exchange went bankrupt in the last quarter of 2022.

According to the lawsuit, the plaintiff accuses Silvergate Bank, its parent firm Silvergate Capital Corporation, and CEO Alan Lane of knowing the activities of SBF. He mentioned that the accused knows Alameda Research uses FTX’s customers’ funds. But they decided to hide the truth from their customers.

Also, the lawsuit mentioned that Silvergate, Lane, and SBF have collaborated at all times. Finally, the lawsuit listed several allegations against the defendants. These include aiding, abetting, encouraging, omitting, assisting in wrongful acts, and other misconducts.

The lawsuit claims some damages, restitution, and disgorgement of gains for the affected victims. It noted that the court would determine the amount for the claims during the trial. Currently, the district court is yet to certify the case. Certification is essential to authenticate the case as a class action.

Silvegate Bank Faces Several Investigations And Lawsuits On Ties With SBF And FTX

Besides the recent lawsuit against Silvergate, the bank has faced several other cases and probes on its ties with FTX and SBF.

As per Bloomberg’s report, US Senators pressed Silvergate Bank regarding its relationship with the FTX exchange. A bipartisan group of lawmakers sent a letter to the bank to ascertain its knowledge about the misuse of customers’ funds by FTX. The group consists of Senator Elizabeth Warren from Democrat and Senators John Kennedy and Roger Marshall from the Republican party. This was after the lawmakers stated that the bank gave an incomplete and evasive response to an earlier inquiry.

Also, Bloomberg reported the US Department of Justice investigation on the bank in early February. The probe relates to the bank’s dealing with SBF’s two companies, FTX and Alameda Research.

The bank is facing a class action in the California Southern District Court concerning its management of FTX’s customers’ funds. Joewy Gonzalez filed the case and accused Silvergate of assisting fraud by transferring FTX users’ deposits into Alameda’s accounts.

Silvergate Bank is a financial infrastructure firm and a Federal Reserve member bank. Founded in 1988, the bank has advanced through the years and has taken a crypto-friendly stance recently. It managed customers’ funds for the FTX crypto exchange before the platform went bankrupt.

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