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Silvergate Bank Investigated by US DOJ, Stocks Take a Hit

admin, 4. February 2023

• US Department of Justice has launched a probe into Silvergate Bank’s dealings with crypto giants FTX and Alameda Research.
• Silvergate shares have seen a sharp drop in pre-market trading following the news of the investigation.
• Sam Bankman-Fried, the disgraced founder of FTX, has been charged with eight criminal charges, including wire fraud and conspiracy to misuse customer funds.

The US Department of Justice has launched an investigation into Silvergate Bank, a crypto-friendly bank, to examine its relationship with fallen crypto giants FTX and Alameda Research. This news has caused Silvergate shares to plunge in pre-market trading.

The investigation, which began a few weeks ago, is reportedly centered around one key question: “What did banks and intermediaries working with Bankman-Fried’s firms know about what US officials have called a years-long scheme to defraud investors and customers?” Sam Bankman-Fried, the disgraced founder of FTX, has been charged with eight criminal charges, including wire fraud and conspiracy to misuse customer funds.

Silvergate was among the lenders hit hardest by the fall of FTX in November last year. The collapse of FTX caused a bank run for Silvergate, forcing the bank to sell $5.2 billion of debt securities to satisfy its creditors. This led to a significant loss of value for its shares, as they lost roughly 88% of their value in 2022 amid the broader crypto market downturn that saw around $2 trillion wiped out of the market.

The US Department of Justice’s investigation into Silvergate is still in its early phases and could end without any charges being brought against the bank. However, the news of the investigation has had a negative impact on Silvergate’s stock, as investors are uncertain of the outcome of the inquiry.

It remains to be seen how the investigation will play out and what effect it will have on Silvergate Bank’s reputation and financials. In the meantime, investors are being advised to monitor the situation closely and to take any necessary precautions.

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