It has been claimed that the fraud section of the United States Department of Justice is conducting an investigation against the crypto bank Silvergate for its participation with the defunct FTX exchange and its affiliates.
According to a story published on February 3 by Bloomberg, which cited “people familiar with the subject,” the investigation is looking at Silvergate’s hosting of accounts that are tied to the companies of former FTX CEO Sam Bankman-Fried.
The cryptocurrency bank situated in California is not suspected of committing any crimes; nonetheless, detectives are trying to determine the extent to which the business was conducted with FTX and Alameda.
The failure of FTX in November had a significant negative effect on Silvergate, which resulted in a loss of one billion dollars in the most recent quarter. As a result of the collapse of the SBF empire, the bank was forced to lay off forty percent of its workforce and admit that it had taken out loans worth billions of dollars in order to avert a liquidity crisis and a bank run.
Investigators from the federal government are attempting to determine whether or not Silvergate and any other businesses that collaborate with FTX were aware of the issue.
According to Silvergate, Alameda signed up for a banking relationship with the institution in 2018, which was before to the release of FTX. According to the report, it asserts that it exercised appropriate due diligence and maintained continuing monitoring at the relevant period.
A spokesman from the financial institution said earlier this week that the company “has a rigorous compliance and risk management procedure.”
Josh Rager, a crypto trader, remarked on the potential effects that this most recent criminal probe may have on cryptocurrency exchanges that are connected to Silvergate.
On January 27, Silvergate announced that company will be temporarily suspending dividend payments, citing “recent volatility in the digital asset business.” At the time, it said that it had a “cash position that was in excess of their digital asset customer-related deposits.”
According to MarketWatch, Silvergate stock has dropped by 13% during the day, and it is now trading at $17.14 in after-hours trading. In addition, the price of SI is today 92% lower than it was in November 2021, when it was at its all-time high of $220.