Silvergate Capital recently settled with the SEC for a substantial $50 million. This settlement comes after Federal Reserve governors and California financial regulators demanded an additional $63 million in fines on July 1. The SEC alleged that Silvergate Capital, along with its subsidiary Silvergate Bank, and two executives, misled investors about the strength of its BSA/AML compliance program and the monitoring of crypto customers, including the exchange FTX. These allegations have serious implications for the company and its reputation in the financial industry.
One of the key accusations leveled against Silvergate Capital was related to the company’s automated monitoring system. The SEC claims that this system failed to monitor over $1 trillion of customer transactions on the Silvergate Exchange Network (SEN). This failure raises serious concerns about the company’s ability to effectively oversee and regulate its financial activities. The alleged wrongdoing took place between November 2022 and January 2023, highlighting a significant period of non-compliance and regulatory failures.
In addition to the $50 million settlement with the SEC, former Silvergate CEO Alan Lane faces a $1 million civil penalty, while former Chief Risk Officer Kathleen Fraher is subject to a $250,000 civil penalty. Both executives have also agreed to five-year officer-and-director bars as part of the settlement. These penalties underscore the seriousness of the allegations and the impact they have had on key personnel within the company. Moreover, the SEC imposed permanent injunctions on both the companies and executives involved, further restricting their ability to engage in certain activities in the future.
Parallel actions by the Federal Reserve Board of Governors and the California Department of Financial Protection and Innovation (DFPI) are seeking an additional $63 million in fines from Silvergate Capital. While these actions do not specifically mention Silvergate’s relationship with FTX, they emphasize the company’s broader failures in handling crypto assets and monitoring activities. The combined regulatory pressure from multiple authorities paints a troubling picture of Silvergate’s compliance and risk management practices.
The regulatory scrutiny faced by Silvergate Capital has significant implications for the company’s future. The multimillion-dollar settlements, penalties, and injunctions imposed by the SEC, Federal Reserve, and DFPI signal a major reckoning for the company and its executives. Moving forward, Silvergate will need to overhaul its compliance programs and regulatory practices to rebuild trust with investors and regulators alike.
Leave a Reply