Senators want more info on Silvergate’s ‘egregious failure’ on FTX

A bipartisan group of senators want more information from Silvergate Bank, a bank that caters to crypto and fintech clients, about the bank’s current financial wellbeing, while also taking the company to task for its management of FTX and Alameda funds. 

“Your bank’s involvement in the transfer of FTX customer funds to Alameda reveals what appears to be an egregious failure of your bank’s responsibility to monitor for and report suspicious financial activity carried out by its clients,” wrote Sens. Elizabeth Warren, D-Mass., John Kennedy, R-La., and Roger Marshall, R-Kan., in a letter to Alan Lane, Silvergate’s CEO. The group of senators cite, “reports suggesting that Silvergate facilitated the transfer of FTX customer funds to Alameda.”

Warren and Kennedy both sit on the Senate Banking Committee, while Marshall is a member of the Senate Agriculture Committee, which is debating legislation to reform regulations on some digital assets and crypto exchanges due to that committee’s oversight of the Commodity Futures Trading Commission. 

“Were you aware that FTX was directing its customers to wire money to Alameda’s account with your bank?”, the senators write to Lane. The senators also want to know whether Silvergate flagged such transactions to the Financial Crimes Enforcement Network, and why former Chief Risk Officer Tyler Pearson left the bank. 

Lane sought to reassure investors and customers of the bank’s financial health and compliance with federal laws in a public letter yesterday, saying he sought to combat, “misinformation … spread by short sellers and other opportunists” following the FTX collapse. The bank’s stock lost approximately half of its value in the month since the failure of its highest-profile client. 

Last week, Warren spoke of the dangers of crypto firms getting entangled with the banking system. Since its founding, Silvergate Bank has been one of the critical U.S.-based junctions for crypto firms looking to get access to fiat bank accounts. 

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