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Silvergate’s ties to FTX are under scrutiny by US senators who say the crypto bank was ‘evasive’ in earlier inquiries

Sen. Elizabeth WarrenSEPTEMBER 20: U.S. Sen. Elizabeth Warren (D-MA) arrives for a Senate Banking, Housing, and Urban Affairs Committee on Russian sanctions, on Capitol Hill, September 20, 2022 in Washington, DC. The Committee held the hearing to discuss additional sanctions against Russia for its invasion of Ukraine.

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  • A bipartisan group of senators reportedly sent a letter to Silvergate Monday asking about connections to FTX. 
  • The crypto-focused bank previously declined to fully answer FTX-related questions, the senators said. 
  • The bank’s reasoning was “simply not an acceptable” rationale, they added.  

A bipartisan group of US senators is pressing Silvergate for more information related to the crypto-focused bank’s ties to FTX.

In a letter addressed to Silvergate CEO Alan Lane on Monday, lawmakers claim that the firm failed to fully answer questions about its relationship with Sam Bankman-Fried’s collapsed crypto exchange when approached in early December. 

The senators include Democrat Elizabeth, along with Republicans Warren Roger Marshall and John Kennedy. 

“We are disappointed by your evasive and incomplete response to our December 5, 2022 letter regarding Silvergate Bank’s role in the improper transfer of FTX customer funds to cryptocurrency hedge fund Alameda Research (Alameda),” the letter reads. “We wrote to you seeking information on what appeared to be an egregious failure of your bank’s responsibilities to monitor and report suspicious financial activity.”

FTX founder Bankman-Fried, along with other high-level execs, have been accused of coordinating a fraudulent scheme that involved comingling billions of dollars worth of FTX customer funds with sister trading shop Alameda Research.

Those assets allegedly became deposits into a Silvergate account of an Alameda subsidiary, called North Dimension, according to to the Securities and Exchange Commission. FTX customers were advised to wire funds to North Dimension, a seemingly fake electronics retailer, in an effort to hide that the funds were used for Alameda’s investments. 

Silvergate previously declined to fully answer the lawmakers’ FTX-related questions, citing restrictions on disclosing “confidential supervisory information,” according to the senators’ letter. 

The senators said the bank’s reasoning was “simply not an acceptable rationale,” adding that “both Congress and the public need and deserve the information necessary to understand Silvergate’s role in FTX’s fraudulent collapse.”

Lane previously said in December that Silvergate “conducted significant due diligence on FTX and its related entities, including Alameda Research, both during the onboarding process and through ongoing monitoring.”

Lawmakers gave the bank a February 13 deadline to respond to a new series of questions regarding information on whether the bank was aware that FTX was misusing client funds or if it flagged any transactions as suspicious. 

Silvergate did not immediately respond to Insider’s request for comment.

Read the original article on Business Insider
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