Crypto bank Silvergate is reportedly being probed by the United States Department of Justice fraud unit over its involvement with the bankrupt FTX exchange and its affiliates.
The probe is investigating Silvergate’s hosting of accounts linked to former FTX CEO Sam Bankman-Fried’s businesses, according to “people familiar with the matter” as reported by Bloomberg on Feb. 3.
The California-based crypto bank is not accused of any crime, but investigators are attempting to discover how deep the dealings with FTX and Alameda went.
Silvergate was heavily impacted by the collapse of FTX in November, reporting a $1 billion loss last quarter. The bank axed 40% of its staff and disclosed taking out billions of dollars in loans to prevent a liquidity crisis and bank run following the fall of the SBF empire.
The federal investigators are trying to ascertain whether Silvergate and any other companies working with FTX were aware of the situation.
According to Silvergate, Alameda opened an account with the bank in 2018 before the launch of FTX. It claims to have conducted due diligence and ongoing monitoring at the time, according to the report.
This week a bank representative said that the firm “has a comprehensive compliance and risk management program.”
Crypto trader Josh Rager commented on how this latest criminal investigation may impact crypto exchanges with ties to Silvergate.
The Silvergate DOJ fraud probe will probably create some fud for crypto exchanges
Funny how they always time these announcements 🙂 pic.twitter.com/7WxJYFawuF
— Rager (@Rager) February 2, 2023
On Jan. 27, Silvergate suspended its dividends citing “recent volatility in the digital asset industry.” It maintained that it had a “cash position in excess of its digital asset customer-related deposits,” at the time.
Silvergate stock has lost 13% on the day tumbling to $17.14 in after-hours trading according to MarketWatch. Furthermore, SI prices were currently 92% down from their all-time high of $220 in November 2021.
Cointelegraph reached out to Silvergate for comment but had not received a response at the time of publication.