Silvergate Bank Slapped With Class-action Lawsuit For Its Dealing With FTX and Alameda

A number of crypto firms are now facing the heat of the dramatic collapse of crypto exchange FTX last month which sent shockwaves across the crypto industry.

Silvergate Bank CEO Alan Lane is now facing a class-action lawsuit at the California Southern District Court concerning for holding accounts of the embattled crypto firms - Alameda Research and FTX.

Plaintiff Joewy Gonzalez has filed the lawsuit on behalf of himself and several other investors who suffered due to the FTX collapse. The lawsuit seeks to hold Silvergate Bank responsible for its alleged role in transferring FTX user deposits into the bank accounts of Alameda Research. This ultimately caused major panic in the crypto space leading to both firms declaring bankruptcies.

In the lawsuit, plaintiff Gonzalez notes that he invested his savings in crypto through the FTX exchange as the platform had promised investors that they were able to “store assets securely as they gained in value, cash them out or trade them for other assets”.

The lawsuit accuses Silvegate Bank for abetting FTX’s fraudulent activities through improper transfers, lending user funds and comingling funds. The lawsuit blames Silvergate for “furthering FTX’s investment fraud” and mentions that the bank has an obligation in returning what they owe to the plaintiff and other investors. Girard Sharp and Hartley LLP are representing the plaintiff in the court.

Earlier this month, US senators Elizabeth Warren, John Kennedy and Roger Marshall wrote a letter to Silvergate Bank CEO asking him to provide the details of Silvergate’s relation with FTX.

In a letter to Allen, the senators wrote: “In the weeks since FTX’s shocking collapse, new and disturbing allegations about the company’s business practices have continued to surface. 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”.

“Silvergate appears to be at the center of the improper transfer of billions in FTX customer funds. Americans need answers. Those guilty of wrongdoing must be held accountable,” Sen. Warren added.

However, Silvergate has responded to this stating that they too have been a victim of the FTX collapse. The bank wrote: “We received Senator Warren’s letter and look forward to answering her questions openly and transparently. Like many others, Silvergate was the victim of FTX’s and Alameda Research’s apparent misuse of customer assets and other lapses of judgment and we believe our full cooperation will help set the record straight about our role in the digital asset ecosystem.”