Three investor lawsuits against Silvergate Bank, a defunct crypto bank, have been consolidated by a California judge.
The lawsuits accuse Silvergate of aiding and abetting investor fraud by the bankrupt crypto exchange FTX. The plaintiffs claim that Silvergate facilitated FTX’s alleged misconduct, including processing illegitimate transfers of FTX customer funds to its sister trading firm Alameda Research.
The lawsuits were brought against Silvergate by four former investors in February. The cases will remain separate from other federal cases against FTX and its founder Sam Bankman-Fried, but they will be combined by mutual agreement of the litigants.
In early March, Silvergate disclosed its plans to “voluntarily liquidate” assets and shut down operations following a bank run. The bank was also hit with a class-action suit in January for securities law violations.
FTX filed for bankruptcy in November 2022, and its collapse, along with the resultant crypto market crash, created liquidity problems for Silvergate.
Meanwhile, New York state’s financial regulator has clarified that the collapse of Signature Bank was not caused by crypto. The crypto-friendly bank was seized by federal regulators in March.
In a House Financial Services Committee hearing on stablecoins on April 18, New York State Department of Financial Services Superintendent Adrienne Harris said that depositors from a broad base of business sectors, including wholesale food vendors, fiduciaries, trust accounts, and law firms, caused the run on the bank.
Silvergate FTX Lawsuits
In conclusion, the consolidation of the three lawsuits against Silvergate Bank involving FTX shows that investors are seeking damages for their losses resulting from the crypto bank’s collapse. While the lawsuits will remain separate from other federal cases against FTX and its founder, they will be combined by mutual agreement of the litigants.
Meanwhile, the clarification by New York state’s financial regulator that the collapse of Signature Bank was not caused by crypto is a reminder that the crypto industry is not to blame for all financial failures.