The SEC Takes Legal Action Against Silvergate Bank for Apparent Non-Compliance

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            <h2>Highlights</h2>

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                <li>Silvergate was involved in a legal battle with the SEC and other regulators over alleged misconduct.</li>




                <li>The bank reached a settlement of $63 million with the regulatory bodies.</li>




                <li>Former employees of the bank also settled and will undergo a 5-year ban.</li>
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The Securities and Exchange Commission (SEC) took legal action against Silvergate Bank for purported securities violations. The bank, known for its crypto-friendly approach, failed to comply with certain legal standards, including regulations in the Bank Secrecy Act and anti-money laundering laws. Past executives of Silvergate were also implicated in the lawsuit. 

SEC Lawsuit Against Silvergate Bank

The Financial Regulatory entity filed a lawsuit against the bank and its former executives for their actions leading up to the bank’s collapse in 2023. In a filing on Monday, the SEC highlighted the bank’s past behaviors, including noncompliance with specific regulations. 

Silvergate did not adhere to the requirements of the Bank Secrecy Act and anti-money laundering regulations, but falsely claimed to the public and shareholders that it was in compliance. Additionally, the SEC revealed that the bank failed to detect FTX’s $9 billion in transfers. Despite warnings from Bank Secrecy Act examiners, the bank downplayed the risks associated with these actions. 

The bank’s executives failed to disclose certain deficiencies despite being aware of heightened risks with some digital asset customers. This led to legal actions against key figures like Alan Lane, Kathleen Fraher, among others, for failing to monitor suspicious activities. 

“Through the results of multiple examinations of Silvergate by the Federal Reserve, through the Federal Reserve Bank of San Francisco (the ‘FRBSF’), Lane and Fraher should have known that there existed critical deficiencies in the Bank’s BSA/AML compliance program.”

Settlement of $63 Million Reached by the Bank

Silvergate and some former executives decided to settle with the SEC, California Department of Financial Protection and Innovation, and the Federal Reserve regarding the breach and misrepresentation. The bank will pay $63 million ($43 million to federal bodies and $20 million to state regulators.)

While Fraher and Lane accepted the settlement terms, former CFO Antonio Martino contested the allegations. Fraher and Lane will face penalties including a five-year prohibition from holding officer positions in public companies. 

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