• 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 are investigating the company’s risk management practices and further information on its dealings with FTX, as it had been hosting several accounts tied to several businesses associated with FTX founder Sam Bankman-Fried.
• A criminal probe is underway, as Silvergate’s stock has lost 88% of their value in 2022 and were down 40% in premarket trading. Although no charges have been brought against Silvergate, that eventuality is a possibility.
Overview of Silvergate Capital Corp.
The United States Department of Justice has launched a probe into Silvergate Capital Corp., which went public in November 2019 and soon entered the crypto market to become a significant bank for crypto companies that were turned down by traditional banking service providers. It became one of the chief backers of FTX, witnessing over two-thirds of its customer base withdrawing deposits of over $8 billion after the crypto exchange collapsed resulting in a net loss of $1 billion for the bank in the fourth quarter of 2022.
Department Of Justice Investigation
The DoJ is now looking into the operations of Silvergate Captial Corp., especially those with FTX and Alameda Research. Federal prosecutors from the DoJ’s fraud section are conducting a criminal probe into the bank’s dealings, while it was requested by a bipartisan group of United States Senators for details on its risk management practices and further information on its dealings with FTX.
Consequences For Silvergate
The collapse of the FTX ecosystem spelled major trouble for Silvergate as it had to resort to drastic layoffs to mitigate damages incurred by it along with increased scrutiny from government bodies and policymakers due to FUD amongst wary investors caused by judicial scrutiny weighing down on its performance.
Risk Of Charges
Although no charges have been brought against Silvergate yet, that eventuality is still possible given anti-crypto sentiments among most U.S government departments .
Silvergate Captial Corp.’s stock has suffered immense losses due to its involvement withFTX leading to an investigation conducted by federal prosecutors in lightof increasing anti-crypto sentiment among U.S government departments although no charges have been brought against them yet there still remains potential risk if this situation continues or worsens