Silvergate Bank is facing a class-action lawsuit from FTX users, alleging complicity in fraud at the exchange and its affiliated trading firm, Alameda Research.
In a March 20 order, San Diego federal court Judge Ruth Bermudez Montenegro denied Silvergate’s June dismissal motion, asserting that the bank was aware of FTX’s fraudulent activities and benefited from them at the expense of FTX users, contrary to the bank’s denial of these allegations.
The court determined that Silvergate had a duty of care to FTX customers, given its Silvergate Exchange Network (SEN), which was primarily established to facilitate fund transfers to crypto exchanges, including FTX. The judge emphasized the critical role of SEN in enabling the emergence of platforms like FTX in the crypto landscape.
Silvergate provided banking services to both FTX and Alameda, handling transfers and deposits between them. Initially, FTX directed customers to wire funds to Alameda’s account, with Silvergate facilitating these transactions.
The order highlighted Silvergate’s financial gain from transaction fees and interest on FTX-related accounts. The bank’s income significantly increased after it began serving FTX, suggesting a vested interest in supporting the exchange‘s operations.
Silvergate argued in its dismissal motion that it bore no responsibility for FTX customers’ inability to withdraw funds, attributing this issue to FTX and its co-founder, Sam Bankman-Fried. The court dismissed this argument, considering Silvergate’s integral role in facilitating FTX’s operations.
The judge’s decision to proceed with the lawsuit came after over a year since the lawsuits were filed in February 2023. Multiple class actions against Silvergate were consolidated into one case in April.
Silvergate’s collapse in March 2023, following FTX’s bankruptcy in November 2022, underscores the magnitude of the legal and financial challenges faced by the entities involved.
Bankman-Fried, found guilty on seven charges related to fraud and money laundering last November, awaits sentencing scheduled for March 28.
Get $200 Free Bitcoins every hour! No Deposit No Credit Card required. Sign Up